In this article:
- What Is the Difference Between a Hard and Soft Inquiry?
- How Much Does a Hard Inquiry Lower Your Credit Scores?
- How Do Hard Inquiries Affect Shopping for Loans?
- How to Reduce the Impact of Hard Inquiries on Your Credit
- Can Inquiries on My Credit Report Be Disputed?
- Manage Your Hard Inquiries to Get a Loan
Whether it's a retail credit card or a jumbo mortgage loan, whenever you apply for credit the lender will likely pull your credit report in what's known as a hard inquiry. Each one can stay on your credit report for up to 25 months, but it shouldn't affect your credit scores for more than a year.
Having several hard inquiries within a short time may have a greater impact—except in certain cases. Even so, the effect of each hard pull diminishes with time.
Checking your own credit report or using credit monitoring services is not considered a hard inquiry and has no effect on your credit score. Only inquiries made by others are considered hard inquiries.
What Is the Difference Between a Hard and Soft Inquiry?
When you review your credit reports after applying for a loan, credit card or other form of credit, you'll likely see the hard inquiry it caused, but you also may see other inquiries, called soft inquiries.
These are often the result of you checking your own credit report or a lender or credit issuer preapproving you for credit, but those aren't the only events that can cause them. They differ from hard inquiries because they don't generally reflect an application you've submitted for credit, and could be the result of something like the IRS verifying your identity for your tax refund, for instance. Soft inquiries do not appear on your credit report and do not affect your credit score.
How Much Does a Hard Inquiry Lower Your Credit Scores?
How many points does a hard inquiry cost you off your credit score? FICO reports that a hard inquiry will reduce your credit score by an average of five to 10 points. If you have good credit, the decline may be less than that, and your scores should rebound in a few months.
If you have a lot of hard inquiries within a short time, the effects will last longer; your overall credit score may be slightly reduced for as much as a year. After about two years, hard inquiries drop off your credit report entirely.
In general, the number of hard inquiries on your credit report isn't a major factor in your credit score. The FICO® Score☉ model considers your payment history, credit utilization, total debt, length of credit history, credit mix and new credit when calculating your credit score. Hard inquiries are part of the "new credit" category, but they don't weigh heavily relative to the other factors.
How Do Hard Inquiries Affect Shopping for Loans?
When you're shopping around for the best rates on a mortgage, auto loan or other large loan, you may apply with several lenders, which will cause a separate hard inquiry from each one to appear on your credit report. But that doesn't mean your credit score will plummet, as most credit scoring models weigh multiple inquiries for mortgage or auto loans as one inquiry if they are made within a certain time period (14 to 45 days, depending on the scoring model).
However, multiple hard inquiries for different types of credit aren't treated the same way, and may cause lenders to suspect you're having financial difficulties. Applying for a credit card, an auto loan, a home equity loan and a personal loan within the span of a month, for instance, could be a signal you're in need of money and pose a risk to lenders.
If you're seeking a large loan, you shouldn't necessarily let the fear of hard inquiries stop you from shopping around for the lowest interest rates. However, you should take steps to ensure that hard inquiries don't negatively affect your credit.
How to Reduce the Impact of Hard Inquiries on Your Credit
If you plan to apply for a large loan such as a mortgage, having fewer hard inquiries on your report can make you more attractive to lenders. To minimize the impact of hard inquiries on your credit score, avoid applying for new credit in the months leading up to your big loan application.
You should also get a free copy of your credit report and check to make sure that all the hard inquiries listed accurately reflect your applications for credit. Hard inquiries that you didn't authorize could be a warning sign that someone is attempting to steal your identity and applying for credit in your name.
Improving your credit score can also reduce the impact of hard inquiries. If you're not sure what your credit score is, check it to see. The higher your score, the less you'll need to worry about the negative effects of a single credit inquiry. To improve your credit score before applying for a loan, take these steps:
- Pay all your bills on time. If you have any late accounts, bring them current right away.
- Keep your credit card balances low. Ideally, pay your balances in full every month. If that's not possible, work on paying down debt and keeping your credit utilization ratio below 30%. This ratio measures how much of your available credit you're actually using. Use too much, and lenders may be reluctant to extend more.
- Sign up for Experian Boost™† , a free service that adds your on-time utility, cellphone and other bill payments to your credit report.
Can Inquiries on My Credit Report Be Disputed?
Credit bureaus won't remove accurate hard inquiries from your credit report. You'll have to wait until the inquiry falls off your file naturally.
A hard inquiry from a company you don't recognize doesn't necessarily indicate a case of identity theft. When you shop around for a mortgage or car loan, websites, brokers or dealerships may send your information to multiple lenders, who will each check your credit. If you don't recognize the name of the company that performed the hard inquiry, you can often find a phone number for the company listed in the entry on your credit report.
If it turns out that a company pulled your credit report in error or without your permission, or that someone is applying for credit in your name, you can contact the credit bureau to dispute the inquiry and ask to have it taken off your credit report.
Manage Your Hard Inquiries to Get a Loan
While a single hard inquiry on your credit report can cause a small, short-term decline in your credit score, it shouldn't have a major negative impact, especially if you have good credit. Having several hard inquiries for different types of credit in a short time, however, could hurt your credit score for up to a year and potentially keep you from getting credit.
If you're seeking a loan for a big purchase like a home or a car, first get a copy of your credit report and make sure the hard inquiries listed are accurate. Avoid new hard inquiries until you apply for your mortgage or auto loan. And consider signing up for free credit monitoring—it will help spot potential signs of fraud or identity theft, including unauthorized hard inquiries.