How Many Points Does a Hard Inquiry Affect Your Credit Score?

What is a hard inquiry?

Hard inquiries (also known as “hard pulls” or “hard credit checks”) generally occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision. They commonly take place when you apply for a mortgage, loan or credit card, and you typically have to authorize them.

A hard inquiry could lower your scores by a few points, or it may have a negligible effect on your scores. In most cases, a single hard inquiry is unlikely to play a huge role in whether you’re approved for a new card or loan. And the damage to your credit scores usually decreases or disappears even before the inquiry drops off your credit reports for good (hard credit checks generally stay on your credit reports for about two years).

That doesn’t sound so bad, but you may want to think twice before applying for a handful of credit cards at the same time — or even within the span of a few months. Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider you a higher-risk customer, as it suggests you may be short on cash or getting ready to rack up a lot of debt. So consider spreading out your credit card applications.

How many hard inquiries is too many?

The effect of a hard inquiry on your credit scores ultimately depends on your overall credit health. In general, adding one or two hard inquiries to your credit reports could lower your scores by a few points, but it’s unlikely to have a significant impact.

Having a lot of hard inquiries within a short time frame though will likely have a greater impact on your scores. This is because lenders — and in effect, credit-scoring models — look at multiple credit applications in a short amount of time as a sign of risk. Though there can be exceptions when you’re shopping for specific types of loans, like car loans, student loans or mortgages.

Learn more about minimizing the effect of hard inquiries below.

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How long do hard inquiries stay on a credit report?

Hard inquiries typically stay on your credit report for two years but some credit reporting bureaus may not factor it into your score after a year. You may also find that some credit scoring companies only consider hard inquiries from the past twelve months.

Are you comparing rates for auto loans, credit cards or more? When hard inquiries are pulled during a short period amount of time, credit reporting agencies generally recognize this as one event.

Unlike a soft inquiry, a hard inquiry should not be performed without your consent. If you’ve noticed a recent hard inquiry that you did not authorize, you can reach out to your credit reporting bureau. Once you contact them, you can find out more information on how to file a report and start the process of removing that inquiry from your report.

New credit inquiries can raise red flags for lenders

What creditors like to see are consumers who pay their bills on time. They also like to see low credit usage relative to your credit limits (under 25% is good; under 10% is great). These two areas – payment history and credit utilization – make up 65% of a person’s credit score.

The remaining 35% is the length of credit history at 15%, credit mix (like credit cards and installment loans) at 10%, and finally new credit (those pesky hard inquiries) at 10%. Why should the 10% from new credit and inquiries make that much difference to a would-be creditor? 

It’s because a hard inquiry injects an amount of uncertainty in your file. Why did you apply for new credit? Are you going to max out the new credit line? Is the new credit a sign of instability? These are all potential red flags for a lender.

When the credit scoring elves at FICO and VantageScore look at this new activity on your file, their historical algorithms tell them that a certain percentage of people really do max out their new lines and some even go into default in a year or two. So, until you demonstrate (to their models) that you are a still wise credit user, your score declines. This drop is more pronounced in a file with less credit history.

This is especially true if several inquiries are made in a relatively short period of time. If a creditor sees a bunch of new accounts in a potential customer’s credit report, alarm bells are going to sound.

In my first book, “Credit Repair Kit for Dummies,” I point out that one inquiry may have no effect on your score at all and, in general, only takes five points or less off a mature score. But lots of inquiries can signal greater risk to the creditors.

Page 120 of that book lays it out this way: “For example, industry statistics show that six inquiries or more on your credit report means that you may be eight times more likely to declare bankruptcy than if you had no inquiries on your report.”

FICO only counts inquiries over the past 12 months in its scoring matrix, even though the inquiries stay on your credit report for two years. So we are talking about a bunch of new accounts in a 12-month-or-less period. Risk is what it’s all about for the creditors, and analyzing what kind of profit or loss a potential customer poses is why hard inquiries can bring your score down.

Also, most credit scores that drop due to inquiries will bounce back after a few months of good credit behavior by the consumer. Keep in mind that if it’s only one or two inquiries and the credit is granted, the increase in available credit could balance out any points lost due to the inquiry.

But for anyone contemplating a mortgage or other large credit purchase, my advice is to put any plans to apply for new credit on hold until after any credit reports for a mortgage loan are in your rearview mirror.

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.

So, How Many Points Are We Talking Here?

The credit impact from a hard inquiry will vary from person to person depending on their individual credit history as well as all the other information in the credit report. FICO says that one new inquiry typically results in a less than five-point drop in your credit score. 

Five points isn’t a colossal amount, but it could drop you into a lower rate tier. Generate a few hard inquiries in a short period of time, and the points can add up to a more significant drop in your scores. 

How many points will a soft inquiry impact your credit score?

A soft inquiry does not affect your credit score in any way. When a lender performs a soft inquiry on your credit file, the inquiry might appear on your credit report but it won’t impact your credit score.

What to know about rate shopping

Research has indicated that FICO Scores are more predictive when they treat loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, FICO Scores ignore inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your scores while you’re rate shopping.

In addition, FICO Scores look on your credit report for rate-shopping inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.

What are hard and soft credit score inquiries?

There are two types of credit score inquiries lenders and others (like yourself or your landlord) can make on your credit score: a "hard inquiry" and a "soft inquiry." The difference between the two is that a soft inquiry won’t affect your score, but a hard inquiry can shave off some points.

Here’s what hard and soft inquiries are all about: why there’s a difference, and who makes them.

Soft Inquiries

Soft inquiries may not affect your credit score directly, but they can be viewed on your reports by either yourself or lenders. When you apply for a line of credit, lenders will usually perform soft inquiries for an overview of the basic details on your credit score, including how often you’ve applied for credit. This information is usually gathered by scoring models calculated by the three credit reporting bureaus.

Hard inquiries

Hard inquiries do affect your credit score and can be pulled for a variety of reasons, such as a credit check or proof of conditional approval for loans. A hard inquiry is usually only performed when you have completed a full application for a credit card or loan. Some credit card companies might also place a hard inquiry on your account if you’ve requested a credit line inquiry.

Unlike soft inquiries, a hard inquiry could impact your credit score but there are variables that may cause the effects to be minimal. The credit reporting bureaus don’t always consider student loan applications, car loans, and home mortgage inquiries and these may be removed from your credit report after a short period of time.

How Do Hard Inquiries Affect Your Credit Score?

Typically, when someone does a hard inquiry on your credit, your credit score will drop by five to 10 points. This number can be even lower than five points depending on various elements that constitute your credit report, such as your history of repayment, credit utilization, and so forth.

According to FICO, a credit inquiry results in less than five points for most consumers. The better your credit history, the fewer points will be taken from your credit score. Moreover, a credit score drop is not permanent, and it will increase again within a few months if you take care of your finances.

How Long Do Hard Inquiries Affect Your Credit Score?

Hard inquiries show on your credit report for two years, but they won’t impact your credit score after one year or less. If you pay your bills on time and responsibly manage your finances, you can expect a credit score increase already a few months after a hard credit check, unless you authorize another hard credit check during this period, of course.

In most cases, credit scoring models (like FICO or VantageScore) won’t show the impact of hard inquiries after a year, but if it happens or you can’t wait for hard inquiries to disappear from your account, you can opt for credit repair services. Credit repair companies work on removing hard inquiries and increase your credit score faster.

Do Hard Inquiries Always Impact Your Credit Score?

There is a situation when a hard credit check won’t affect your credit score, even if you perform multiple credit checks in a short period. It happens when you apply for the same product with different lenders. If you’re shopping for the most affordable rate and the best repayment terms for a personal loan, it’s expected that you’ll visit multiple lenders, which will result in multiple credit checks.

In this case, you don’t need to worry about the hard credit inquiry and points. Most scoring models recognize the purpose of this type of multiple inquiries, and they set a grace period that can range between two weeks and 45 days, depending on the model. For example, the new FICO scoring model has a 30-day grace period for mortgage, car loan, and student loan inquiries, meaning that it’ll ignore all inquiries made during this period. Moreover, FICO recognizes and counts older inquiries as one in a 45-day grace period. Another scoring model, VantageScore, will count multiple inquiries if made within 14 days since the first inquiry.

Examples of hard credit inquiries and soft credit inquiries

The difference between a hard and soft inquiry generally boils down to whether you gave the lender permission to check your credit. If you did, it may be reported as a hard inquiry. If you didn’t, it should be reported as a soft inquiry.

Let’s look at some examples of when a hard inquiry or a soft inquiry might be placed on your credit reports. Note: The following lists are not exhaustive and should be treated as a general guide.

Common hard inquiries

  • Mortgage applications
  • Auto loan applications
  • Credit card applications
  • Student loan applications
  • Personal loan applications
  • Apartment rental applications

Common soft inquiries

  • Checking your credit score on Credit Karma
  • “Prequalified” credit card offers
  • “Prequalified” insurance quotes
  • Employment verification (i.e., background check)

Keep in mind, there are other types of credit checks that could show up as either a hard or soft inquiry. For example, utility, cable, internet and cellphone providers will often check your credit.

If you’re unsure how a particular inquiry will be classified, ask the company, credit card issuer or financial institution involved to distinguish whether it’s a hard or soft credit inquiry.

Business Credit and Inquiries

Most business credit scores don’t take inquiries into account. But credit managers who review business credit reports may balk at extending credit or financing to some with too many recent inquiries. But as a business owner, the lender may check your personal credit when you apply for a small business loan or financing, and that may affect your personal scores, or business credit scores such as the FICO SBSS which often includes both personal and business credit data. 

Pro tip: What you don’t know can kill your business Take charge of your financial health today with a FREE Nav account. We’ll protect and monitor your personal and business credit, so when it comes time to find financing you’re prepared on all fronts. Sign up now

This article was originally written on August 29, 2019 and updated on December 10, 2019.

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