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Top things to know about credit inquiries:

  1. A credit inquiry in a record of the credit bureau disbursing your credit report
  2. Hard inquiries are generated when you apply for credit. All other inquiries are soft inquiries. 
  3. Hard inquiries have no impact on your credit score after one year. Soft inquiries never impact your credit score.

What is a credit inquiry?

A “credit inquiry” is the credit bureau’s record of when your credit report was access. A credit inquiry includes three key pieces of information:

  1. Who accessed your credit report 
  2. When they accessed your credit report, and 
  3. Why they accessed your credit report.

Under the FCRA there are detailed restrictions called permissible purposes that restrict access to your credit report. Therefore, it is imperative that credit bureaus keep detailed records of this access.  

What is a hard credit inquiry?

A hard inquiry is when your credit is pulled for the purpose of obtaining new credit. That means a hard inquiry is only put on your credit report when you have attempted to get new credit.  However, some lenders will begin the credit application process with a soft inquiry. This means they review your credit to see if you meet their credit criteria. If so, they can give you a  pre-approval with approximate terms for the credit offered.  This allows you to choose credit that suits your needs without a hard inquiry.

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What is a soft credit inquiry?

A soft inquiry is basically any credit inquiry that is not a hard inquiry. There are a multitude of different reasons for these to be on your credit report. Here are a some of the most common that you may have:

  1. Pre-approval in the application process for new credit
  2. Pre-approval through a pre-screening process (the credit offers in the mail)
  3. Checking your credit report (i.e. Credit Karma or annualcreditreport.com
  4. Account management review by a current lender (most banks and creditors do it)
  5. Pre-employment credit review
  6. Insurance applications

How do inquiries impact my credit score

First of all, only hard inquiries impact your credit score. Soft inquiries are never seen as part of the credit review process. The impact of hard inquiries is dependent on the number of inquiries and the time since each inquiry was made. 

Although inquiries remain on your credit report for 2 years, they only impact your FICO credit score for one year. But even more importantly, if you don’t have any inquiries for three to six months, inquiries typically won’t impact your score more than a few points. 

How many points does your credit score go down for an inquiry?

If you only have one or two inquiries within the last few months, the hard inquiries will have minimal impact, think 5 to 10 points on your credit score. That impact should dissipate within a month or two.

Do multiple inquiries count as one?

If you are shopping around for the best credit, you are likely to have several hard inquiries on your credit report in a short amount of time. Multiple hard inquiries that occur within a short time will not negatively impact your credit score any more than a single hard inquiry. If, on the other hand, you have hard inquiries hit your credit report over several months, those will impact your credit score more significantly than if they all took place in a short time period.  

Do inquiries account for 10% of my credit score? 

Credit score articles and videos often say that inquiries account for 10% of your credit score. This is a misquote. The factor that accounts for 10% of your credit score is “New Credit,” which includes inquiries, but also includes new credit lines. Inquiries are the lesser part of this factor. 

Why does your credit score go down when you open a new credit account?

New credit accounts on your credit report indicate credit risk. Having accounts less than a year old, lowers your credit score. The newer the account, the more negative it is. And the more new accounts you have, the worse the negative impact will be. 

By simply letting your inquiries and new accounts age while making all of your payments on-time every month, you will see credit score improvement!

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Nathan Foley

Nathan Foley