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How Hard Inquiries Affect Your Credit Score

Michelle Black

WealthFit Contributor

Checking your credit report seems like an ordinary task—after all, how will you or lenders know what your credit score is? The reality is that some credit checks won’t impact your score while others can actually hurt your score.

Understanding how inquiries affect your credit score can be a complicated subject to wrap your head around, so keep reading below for an explanation of how credit inquiries work.

In this article, you’ll also learn how hard inquiries affect your credit score and more importantly, how to keep this from happening so that you can maintain an excellent credit score.

Before we discuss how inquiries affect your credit score, let’s take a step back to understand exactly a credit score is and why it’s important for your financial future.

What is a Credit Score?

A credit score is a number, three digits long, that shows how likely you are to repay debt, or borrowed money.

Ranging from 300-850, the health of your credit score determines your ability to borrow money for items such as a car or mortgage or apply for a credit card. The lower your score, the less likelihood that a lender will allow you to borrow money.

What Is a Credit Inquiry?

Anytime a credit bureau allows a lender to access your credit information a record of that access is placed on your credit report. This is known as a credit inquiry.

Credit inquiries can remain on your report for up to 24 months. As we’re about to explore, they’re not all bad, though some inquiries can have a negative impact on your score.

Soft vs. Hard Inquiries

Credit inquiries can be sorted into two categories—hard and soft. Soft inquiries never damage credit scores. Hard inquiries affect your credit score in a different way: they have the potential to hurt it.

Soft Inquiries

As mentioned, soft inquiries have zero impact upon credit scores. In fact, if a lender pulls a copy of your credit report, soft inquiries won’t even show up. Soft inquiries only show up when you pull a copy of your own personal credit report; they’re invisible to everyone else.

Examples of Soft Inquiries

  • Personal Credit Checks (e.g. pulling your own report)
  • Promotional Inquiries (e.g. pre-screened offers you receive in the mail)
  • Account Maintenance Credit Checks (e.g. existing creditors reviewing your report)
  • Employment Screening Credit Pulls
  • Insurance Company Credit Checks

Hard Inquiries

Hard inquiries occur when you apply for new credit or services. Some—but not all—hard inquiries affect your credit score by damaging it.

Examples of hard inquiries include:

  • Loan Applications (e.g. mortgages, personal loans, student loans, etc.)
  • Credit Card Applications
  • Collection Agency Skip Tracing

How Much Do Hard Inquiries Hurt Credit Scores?

As stated before, some hard inquiries affect your credit score in a negative way, while other hard inquiries don’t—it’s a confusing matter. Let’s look further into hard inquiries to understand the difference.

Shopping For Credit

Applying for a lot of credit in a short period of time can hurt your credit score—but there’s an exception to that rule. You can let your credit be pulled multiple times within a 45-day period if you’re shopping for the best rate on certain types of loans.

Multiple hard inquiries within a 45-day period (14 days with older scoring models) are combined for scoring purposes and will only count once for the following types of loans:

  • Mortgages
  • Auto Loans
  • Student Loans

You can rate shop without fear of credit score damage. Doing your homework to find the best deal available for financing doesn’t mean you’re a higher credit risk—it means you’re doing your due diligence.

Point Deductions

A hard inquiry doesn’t automatically deduct 3 points (or any other number) from your score. Credit scoring doesn’t work that way. No item on a credit report is worth a certain number of points. Instead, groups of items are worth a certain number of points.

With inquiries specifically, a scoring model takes a look at how many total inquiries appear on your report in the last 12 months. Based on which inquiry range your report falls into, you’ll earn a certain number of points to be added onto your overall credit score.

Keep It in Perspective

It’s important to keep the potential impact of hard inquiries in perspective. Yes, they can impact your credit, but inquiries only make up 10% of your credit score to begin with. The remainder of your credit score is determined by:

  • 35% Payment History
  • 30% Total Available Credit
  • 15% Length of Credit History
  • 10% Types of Credit in Use

Hard inquiries also have a short shelf life when it comes to credit scoring. They’re ignored after 12 months and some are bypassed even before then.

In the world of credit scoring, where it takes years and years to build up the length of credit history, that’s a very short period of time.  

Yes, hard inquiries affect your credit score. But putting too much emphasis on credit inquiries is like trying to blame the brownies you ate last week for being the reason you’re overweight. Sure, the brownies might have been a bad choice, but if you need to lose a significant amount of weight, you likely have bigger underlying issues to overcome.

In the same way, if you’re not happy with your credit score right now, too many inquiries are probably only a small part of the problem. It’s smart to avoid applying for new credit excessively, but you’re better off focusing on the credit score categories that matter more.

For example, you’re more likely to improve your credit score by making a commitment to pay your bills on time every month, working to pay down your overall credit card balances and maintaining credit for a length of time.

Then, if you want to put a cherry on top of your credit improvement plan by limiting new credit inquiries, you will be well on your way to an excellent credit score.

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Written By

Michelle Black

Michelle Black is a credit expert with over 16 years of experience in the industry and a freelance writer.