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When a lender or creditor asks a credit bureau to look at your credit report, that inquiry may get noted as part of your credit history. There are two types of inquiries—hard and soft.
- A hard inquiry occurs when a lender with whom you've applied for credit reviews your credit report as part of their decision-making process. This type of inquiry appears on your credit report and can influence your credit scores.
- A soft inquiry occurs in cases where you check your own credit or when a lender or credit card company checks your credit to pre-approve you for an offer. Soft inquiries do not appear on your credit report and do not impact your credit scores.
If you apply for credit, such as a mortgage, auto loan or credit card, the lender (with your permission) will check your credit report and credit score from one or more of the major credit bureaus. Because these inquiries are tied to an actual credit application, they're considered hard inquiries, and they can affect your credit scores.
How Hard Inquiries Impact Your Credit Scores
Too many hard inquiries in a short period of time can be concerning to lenders. That's because multiple hard inquiries may add up to numerous new accounts. Opening various new credit accounts may mean you're having trouble paying bills or are at risk of overspending. As a result, hard inquiries have a temporary, negative effect on your credit scores.
Credit scoring models do consider the possibility that you're rate shopping for the best loan deal available. Most will consider multiple inquiries for a certain kind of credit product, such as a car loan or a mortgage, in a short period as a single inquiry, which will have a smaller impact on your credit score than multiple, separate inquiries.
Inquiries are only one of many factors used in calculating your credit scores. Other factors, including your payment history, credit utilization ratio, mix of types of credit, and how long you've been using credit have a more substantial impact on your credit score. Hard inquiries are rarely the reason you might be denied credit.
How Long Inquiries Stay on Your Credit Report
Hard inquiries remain on your credit report for just over two years, but their impact on your credit lessens over time. Even if you have multiple hard inquiries in a span of just a few months, it's still unlikely a potential lender will give them too much weight. Your history of on-time payments and a low credit utilization ratio are much more important to most credit scoring models and the lenders that use them.
Although you can't have an accurate hard inquiry removed from your credit report, if a company pulled your credit in error or without your permission, you can ask the credit bureau to remove the inquiry from your file. Keep in mind a hard inquiry from a lender you don't recognize could be a sign that someone else has tried to get credit in your name and may be a sign of identity theft, so you'll want to look into things more if you see inquiries that aren't yours.
When you check your own credit report or give permission to someone like a potential employer to review your credit report, a soft inquiry occurs. Soft inquiries may also occur when businesses, such as lenders, insurance companies, or credit card companies, check your credit to pre-approve you for offers.
Because soft inquiries aren't linked to a specific application for new credit, they're only visible on your credit report to you with a couple of exceptions. Soft inquiries on your credit report are only visible to you, except: (1) insurance companies may be able to see other insurance company inquiries; and (2) inquiries by debt settlement companies you have authorized to access your report may be shared with your current creditors.
These inquiries have no effect on your credit score as they are never considered as a factor in credit scoring models. Soft inquiries are not disputable but are available for reference. Potential lenders won't be able to see them (except insurance companies may be able to see other insurance companies' inquiries), and soft inquiries are never considered as a factor in credit scoring models.
Managing Your Credit Inquiries
If you are concerned about hard inquiries, you can take steps to manage their impact, including:
- Only apply for credit when you truly need it.
- If you'll be applying for a mortgage or auto loan, be sure to do your shopping in a short time frame.
- Regularly check your credit report to ensure any hard inquiries that appear are ones you really initiated, and not potential signs of fraud.
- Take steps to manage other factors that are more important to your credit scores, such as your payment history and credit utilization rate. Pay all your bills on time every month and pay off credit card debt as quickly as possible.
And, don't forget, you can check your own credit report any time, without having any impact to your credit scores.