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How Credit Inquiries Affect Your Credit Score
Here’s how to manage your credit applications to keep your credit score as high as possible.
How credit inquiries affect your credit score
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Written by Nicole Dieker
Edited by Liliana Hall
Reviewed by Cathleen McCarthy
March 10, 2022 / 5 min read
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If you’re trying to increase your credit score, chances are you’re watching many factors. You’re making sure you pay your bills on time—because your payment history counts for 35 percent of your credit score. You’re also watching your credit utilization ratio, which counts for 30 percent of your FICO score. But did you know that credit inquiries make up 10 percent of your FICO score and some types of credit inquiries can lower your credit score?
There are a lot of reasons why someone might inquire into your credit history. When you apply for a new credit card, take out a mortgage or rent an apartment, lenders and landlords conduct credit inquiries to determine whether you are likely to be a financial risk. These inquiries are called “hard credit inquiries” and have the potential to drop your credit score by a few points.
Other types of credit inquiries are called “soft credit inquiries.” These inquiries are more like background checks and don’t affect your credit score in any way.
A lot of people wonder how much credit inquiries affect their credit score. Since the best credit cards are generally reserved for people with good or excellent credit, every credit score point counts. Does that mean you need to worry about credit inquiries lowering your score? How many points does a hard inquiry—and other types of credit management activities—take off your credit score?
In most cases, you don’t have to worry about credit inquiries doing significant damage to your credit. Let’s take a close look at how different types of credit inquiries affect your credit score.
What is a credit inquiry?
A credit inquiry is exactly what it sounds like—an inquiry into your credit. Lenders, landlords and potential employers have the ability to request access to your credit file, and these credit inquiries help them get a quick overview of whether you’ve been using your credit responsibly.
Why do credit inquiries matter?
When you apply for a credit card, begin shopping for a loan or prepare to take on a new financial responsibility, like renting an apartment, the lenders and companies involved want to know whether you’re likely to be a financial risk. By conducting an inquiry into your credit history, these companies are able to assess your level of financial responsibility and the likelihood that you might default on your loan, miss credit card payments or skip out on the rent.
There are two different types of credit inquiries: hard inquiries, which can have a negative effect on your credit score, and soft inquiries, which don’t affect your score at all.
Hard credit inquiries
Hard credit inquiries, sometimes called “hard pulls,” take place when you request a new line of credit or begin the process of taking on a major financial commitment. If you apply for a credit card, for example, the card issuer will pull your credit file and you’ll see a hard inquiry on your credit reports. You must give permission for a company to perform a hard pull on your credit, so these inquiries shouldn’t take you by surprise.
Common hard credit inquiries include:
Credit card applications
Loan applications (including mortgages, car loans, and personal loans)
Apartment rental applications
Phone or utility applications (such as turning on electric in a house or signing up for a new cellphone contract)
Soft credit inquiries
Soft credit inquiries, or “soft pulls,” occur when companies pull your credit file for a reason unrelated to a new financial obligation. Soft credit inquiries are often performed as background checks and are sometimes used to determine whether you can be pre-approved for a credit offer. Although some soft credit inquiries (such as employer credit checks) only take place with your permission, other soft inquiries don’t require permission and may even occur without your knowledge.
Common soft credit inquiries include:
Employer credit checks
Prequalified offers for loans, credit cards or insurance
Credit monitoring services
Credit limit increases (or decreases) on your credit cards that you did not request
Soft inquiries are usually not indicative of a firm financial commitment, so they don’t affect your credit score.
Does checking your credit score lower it?
Checking your own credit score is considered a soft inquiry and does not lower your credit. There are many free credit score services and credit monitoring apps out there, and these services do not generally perform hard inquiries on your credit file. If a credit-tracking app or website does make an inquiry into your file as part of its credit monitoring process, it will be a soft inquiry that will have no effect on your credit score.
How Many Points Does an Inquiry Drop Your Credit Score?
According to FICO, a hard inquiry from a lender will decrease your credit score five points or less The drop is temporary.
How Many Points Does an Inquiry Drop Your Credit Score?
September 13, 2019 • 2 min read
By Jennifer White
How many points does your credit score drop when a lender looks at your credit report?
According to FICO, a hard inquiry from a lender will decrease your credit score five points or less. If you have a strong credit history and no other credit issues, you may find that your scores drop even less than that. The drop is temporary. Your scores will bounce back up again, usually within a few months, assuming everything else in your credit history remains positive.
What is the difference between a hard inquiry and soft inquiry?
There are two types of inquiries on a credit report, often referred to as "hard" and "soft:"
Hard inquiries occur when a lender checks your credit report because of an application for goods or services, so they may affect your credit score.
Soft inquiries are usually initiated by others, like companies making promotional offers of credit or your lender conducting periodic reviews of your existing credit accounts. Soft inquiries also occur when you check your own credit report or when you use credit monitoring services from companies like Experian. These inquiries do not impact your credit score.
What about when you are shopping for a loan?
When you are shopping for a new loan, such as for a home or a car, your information may be sent to multiple lenders to try to find you the best rates and loan terms. You will see a separate inquiry on your credit report from each of these lenders, but your credit score won't be penalized for each one. Most credit scores will count multiple inquires for mortgage or auto loans as one if they are made within a certain period of time (14-30 days). Some scores do the same for other types of lending.
When you request credit limit increase, is that a hard inquiry too?
Possibly. It depends on the lender and their policy for how they treat that request. Some lenders may treat it as an application for new credit or additional credit and require a new credit report be accessed, which will then display as a hard inquiry. Others may approve the request without pulling your credit report or by doing what's called an "account review," which will appear on your report as a soft inquiry. If you are concerned, it's best to ask your lender before applying for a higher credit limit.
Improving Your Credit Score
Generally speaking, the stronger your credit history and credit scores, the less you need to worry about the impact from a single inquiry. If your credit scores are marginal and you are looking to improve them, here are some things you can do:Make all payments on time. Your payment history is the biggest factor in your credit scores. The best thing you can do for your scores is to make sure every payment is on time and to bring any past due accounts current.Keep your credit card balances low. Your utilization rate is also an important factor in credit scores. The lower your balances on revolving accounts, the lower your utilization rate will be. Low utilization rates are good for credit scores.Sign up for Experian Boost™† . Experian offers a free tool called Experian Boost that can help you increase your FICO scores instantly by giving Experian permission to link to your bank account and add your monthly utility and cell phone payments to your credit report. Signing up is fast and easy, and you'll get your new credit score right away.
Thanks for asking,Jennifer White, Consumer Education Specialist
This question came from a recent Periscope session we hosted.
How Credit Inquiries Affect Your Credit Score – Forbes Advisor
Anytime someone checks your credit report, it's recorded on your report as a soft or hard credit inquiry. Here's how each can impact your credit score.
advisor Credit Score
How Credit Inquiries Affect Your Credit Score
Lindsay VanSomeren, Jordan Tarver
Published: Aug 6, 2021, 12:20pm
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Raise Your FICO® Score Instantly with Experian Boost™
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If you’re trying to improve your credit score or getting ready to apply for credit, it’s crucial to know how credit inquiries can impact your credit. Most credit inquiries have a relatively small impact on your credit score (if any), but if you aren’t careful, your score can experience pitfalls.
Here’s everything you need to know about how they work.
What Is a Credit Inquiry?
Anytime someone checks your credit report including yourself, lenders, banks or even landlords, it’s recorded on your report as a soft or hard credit inquiry.
Each of the three credit bureaus—Equifax, Experian and TransUnion—keep track of the inquiries on your report because it can say a lot about the risk you pose to lenders. While lenders aren’t too worried about soft inquiries because it doesn’t impact your credit score, they do take caution around hard inquiries. In the lender’s eye, multiple hard inquiries can indicate you’re taking on more credit than you may be able to afford.
For example, according to FICO, “People with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy.”
Hard Vs. Soft Credit Inquiry
There are two types of credit inquiries: hard credit inquiries and soft credit inquiries—also referred to as hard and soft credit checks. Here’s how they differ.
Hard Credit Inquiries
Hard credit inquiries are typically the marks you need to worry about affecting your credit score. These inquiries indicate that you’re applying for new debt, such as a mortgage, personal loan or credit card, and are visible to anyone who checks your credit report. Other circumstances may also require a hard inquiry, too, such as:
Applying for certain jobs
Setting up new utility services
Applying for new insurance
Completing a background check
Requesting a credit line increase
Using a debit card to pay for a car rental
Applying for a new apartment or home rental
Soft Credit Inquiries
Soft credit inquiries, on the other hand, don’t impact your credit. They happen whenever you check your credit report or get a free credit score update. Soft inquiries also recorded when companies preemptively pull your credit for preapproval offers for new credit cards and financial products. Unlike hard inquiries, soft inquiries are only visible to you and not others who may check your report.
How Many Points Does a Hard Inquiry Affect Your Credit Score?
In general, hard inquiries don’t have as much of an impact on your credit score as other credit factors. Credit inquiries are only responsible for 10% of your credit score while your payment history makes up 35% of your score.
For most people, according to FICO, a new hard credit inquiry will only drop your credit score between one and five points. While a hard inquiry stays on your credit report for two years, it only impacts your score for one year.
It’s important to note that these inquiries can stack up. For example, if you get a new mobile phone and service plan in January and then apply for a new credit card in February, you may see a bigger hit to your credit score than just five points due to multiple hard inquiries.
However, there is a way around racking up multiple hard inquiries if you’re rate shopping for a loan or mortgage. Here’s how.
What About Rate Shopping?
You can typically check your interest rate with a lender without a hard credit check through a prequalification process. After you prequalify and choose a lender, that’s when it will run a hard credit check.
However, not every lender offers prequalification and you may encounter hard credit checks while rate shopping for some products. For example, if you shop around for mortgage preapprovals, lenders are likely to run a hard credit check from the start.
In these cases, there’s still good news. If you do all of your rate shopping for mortgages, student loans or auto loans within a short period of time, it’ll be recorded as a single hard credit inquiry on your report, even though multiple lenders may have done a hard credit check.
The time period you have to complete your rate shopping varies. FICO has many different credit scoring models that lenders can request. For some of these models, your rate-shopping period is 14 days, while for others, it’s 45 days. Plan on doing all of your rate shopping within the same two-week period if you can to be on the safe side.
Credit Inquiries After Preapprovals
If you’re preapproved for a mortgage or loan, it can take some time before you actually find the house or the car you want to buy.