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

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

Hard Inquiries vs. Soft Inquiries

The essential difference between a hard inquiry and a soft inquiry is whether or not you gave the lender permission to check your credit report.

Generally speaking, if you let a lender scrutinize your credit report, it’s a hard inquiry. If a lender or bank peers into your credit report without your knowledge or permission, it’s a soft inquiry.

As far as your credit score is concerned, soft inquiries are harmless and will mostly go unnoticed. Hard inquiries, however, can leave a mark on your credit report, especially for anyone rapidly applying for credit in a short time span.

What Is a Soft Inquiry?

A soft inquiry happens whenever you check your credit report, or when a lender checks your credit report without your knowledge or permission.

Soft inquiries have no effect on your credit score. Lenders can’t even see how many soft inquiries have been made on your credit report.

Here are some examples of a soft inquiry:

  • Inquiries made by lenders to make you a “pre-approved” credit offer (you know, those offers that often go from mailbox to trash bin unopened).
  • Inquiries that come from employers.
  • Checking your own credit report.
  • Inquiries made by a lender whom you already have an account with.

What Is a Hard Inquiry?

A hard inquiry is when a lender (1) checks your credit report and (2) has your permission to check it.

This is part of the application for a credit card, car loan, student loan or mortgage. These are the kinds of inquiries that consumers fret over, since they stay on your credit report for two years for all the world of lenders and creditors to see.

If your soon-to-be landlord checks your credit as part of the application process for renting an apartment, that’s a hard inquiry, too.

Basically, any time you tell someone it’s OK to check your credit report, FICO counts it as a hard inquiry.

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

A single hard inquiry will drop your score by no more than five points. Often no points are subtracted. However, multiple hard inquiries can deplete your score by as much as 10 points each time they happen.

People with six or more recent hard inquiries are eight times as likely to file for bankruptcy than those with none. That’s way more inquiries than most of us need to find a good deal on a car loan or credit card.

“Realistically, only a narrow group of people has good reason to be cautious about the effect inquiries could have on their FICO score,” Watt said.

Here’s who might be concerned, according to Watt:

  • People who take an unusually long time (several months) to shop for a new mortgage or auto loan.
  • Consumers who shop around in the same year for several different lines of credit not associated with a mortgage or auto loan.
  • People who know before they begin applying for credit – presumably from conversations with creditors – that their credit score barely qualifies them for their desired credit offering.

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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.

Rate Shopping

There are times when hard inquiries won’t drop your score as much as you think. These exceptions occur in some situations when you rate or price shop competitors for the same type of purchase. For example, if you visit several dealerships to shop for a car, each dealership will want to run your credit and they often share your application with multiple financing sources, resulting in multiple inquiries. 

However, you won’t always take a hit for every one of those inquiries. Many scoring models group multiple inquiries in a short period of time and count them as one. 

FICO: Auto, mortgage and student loan inquiries within a  30 to 45-day time period count as one. That time period varies, depending on which version of FICO is used. VantageScore: All inquiries (of any type) within a 14-day rolling window count as one. 

To be safe, limit loan shopping to a two week period. (Note, with FICO scores, shopping for credit cards can generate multiple inquiries.)  

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How to dispute hard credit inquiries

We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau, or CFPB, for further assistance.

This could be a sign of identity theft, according to Experian, one of the three major credit bureaus. At the very least, you’ll want to look into it and understand what’s going on.

Keep in mind, you can only dispute hard inquiries that occur without your permission. If you’ve authorized a hard inquiry, it generally takes two years to fall off your credit reports.

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

A hard credit inquiry could lower your credit score by as much as 10 points, though in many cases the damage probably won’t be that significant. As FICO explains: “For most people, one additional credit inquiry will take less than five points off their FICO Scores.”

FICO also reports that hard credit inquiries can remain on your credit report for up to two years—but when FICO calculates your credit score, it only considers credit inquiries made in the past 12 months. This means that if your credit inquiry is over a year old, it will no longer affect your FICO 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.

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.

How to minimize the number of hard inquiries you have

Hard inquiries aren't bad to have — even if they may cause a slight temporary dip in your credit scores — but it can be good practice to know how to minimize the number of inquiries on your credit report.

Below, CNBC Select rounded up some general guidelines to keep track of your hard inquiries: 

  • Don't apply for several credit cards within a short timeframe. Experts generally recommend only applying for a credit card every six months.
  • Only apply for credit cards you would actually benefit from using. (You don't want to rack up hard inquiries on cards you don't need.)
  • Make sure you check your credit score beforehand (this is considered a soft inquiry and won't harm your score). You can do so for free with most card issuers, using apps such as Discover's Credit Scorecard and Chase's Credit Journey (available to all).
  • Before applying for a credit card, shop around with prequalification tools, which allow you to check your likelihood of qualifying for a card without damaging your credit.

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.

What is a hard inquiry?

A hard inquiry is the initial stage taken by a lender to assess a consumer’s credit report. It happens when a consumer applies for a loan such as student loans, mortgage, credit cards, personal loans or a car loan. Unlike a soft inquiry, a hard inquiry has a small negative impact on the consumer’s credit score by lowering it a few points.

How to minimize the impact of hard credit inquiries

As we mentioned above, if you want to minimize the impact of hard credit inquiries, try to avoid applying for a lot of new credit all at once. You can also aim to condense your credit shopping into a short period of time when you’re getting ready to take out a car loan or a mortgage. The credit bureaus often track this type of rate shopping as a single credit inquiry, which will have less of an impact on your credit score.

Rate Shopping Can Minimize the Impact of Hard Inquiries

Sometimes when you apply for credit, each application triggers a hard inquiry. That’s how credit card applications work, for example. That means applying for multiple credit cards over a short period of time will lead to multiple hard inquiries. And that could hurt your credit scores more than a single hard inquiry.

But some types of credit—like auto loans, student loans and mortgages—work a little differently. Shopping for auto, student or home financing within a short time frame—usually 14 to 45 days—could be treated as just a single hard inquiry. And that could have less of an impact on your credit scores than multiple hard inquiries could have over a short period of time.

So take it from FICO: “If you need a loan, do your rate shopping within a focused period such as 30 days. FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which the inquiries occur.”

It’s different with credit cards

It’s important to note, too, that multiple hard inquiries for credit cards aren’t treated the same way. If you apply to five credit cards in three weeks, those hard inquiries will be counted as five separate inquiries, not one. That’s because you might apply for five new credit cards. And if you get those cards, you’ll dramatically increase the amount of credit card debt you can run up, something that makes lenders nervous.

“In this case, multiple hard inquiries in a short period of time can take a serious toll on your credit scores,” Messier said.

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