Final answer:
Hard inquiries can slightly lower a credit score, while soft inquiries do not affect it. decisions about credit are based on financial history rather than personal characteristics and maintaining a good credit score involves responsible credit management and monitoring for fraud.
Step-by-step explanation:
Inquiries and Credit Scores:
When assessing a person's credit score, both hard and soft inquiries can have an impact. A hard inquiry occurs when a financial institution checks your credit report as part of the loan application process. These can slightly lower your credit score and typically stay on your report for about two years. A soft inquiry, on the other hand, may occur when a person checks their own credit score or when a company checks your credit for background check purposes. Soft inquiries do not affect credit scores.Credit decisions are made based on a person's financial history without considering personal traits such as race, gender, or religion. It is essential to provide only the minimum information required to lending sources to protect your identity. Additionally, it's crucial to monitor your credit history for any fraudulent activities. To maintain a good credit score, it's advisable to manage credit responsibly, pay bills on time, and be judicious about opening new accounts.
Key Credit Practices:
- Lenders consider credit history, income, and debt-to-income ratio before approving a loan.
- Borrowers should inquire about loan terms, interest rates, and repayment schedules when shopping for a loan.
- Staying informed about credit and diligent in financial responsibilities can help in acquiring and maintaining a good credit score.
Understanding these aspects in relation to borrowing and credit can enable consumers to make well-informed financial decisions, which in the long run, benefit their economic stability and capacity to borrow.