How Many Points Will a Hard Inquiry Cost on Your Credit Score?

Whenever you or anyone else checks your credit report, it will show up as an inquiry. That’s not a reason to panic. If it’s just a soft inquiry, your score is unaffected. Even if you authorize a hard inquiry, the temporary drop in your score won’t necessarily disrupt your long-term financial plans. Find out by how many points a hard inquiry will affect your credit score and what you can do to minimize the impact. 

How Many Points Will a Hard Inquiry Take off My Credit Score? 

Hard inquiries may stay on your credit report for two years, but only those that have taken place within the last 12 months will actually affect your credit score. As a rule of thumb, each hard inquiry will lower your credit score by about 5 points. That in itself is unlikely to throw financial planning off course, but if you are making a series of hard inquiries over a short period, it could.

Many lenders would see a burst of hard inquiries as a red flag and might refuse you a loan. There’s a difference, however, between applying for multiple credit lines (e.g., credit cards), and “shopping around” for the best mortgage or car loan. In the latter case, lenders are more accommodating and will usually treat a series of similar inquiries within a 14- to 45-day period as a single hard inquiry. Total cost? No more than 5 points. 

Bear in mind that hard inquiries are just one of the many elements that contribute to your overall credit score. In fact, they carry significantly less weight than your payment history or credit utilization, for example. There are still plenty of ways you can build up your credit score again if you have overdone it with the credit searches. 

When a Hard Inquiry Is Necessary

The purpose of hard inquiries from a lender’s point of view is to confirm your creditworthiness for a loan, credit card or mortgage. For that reason, you are unlikely to obtain a loan without the issuer pulling your credit report. Usually the issuer makes a hard inquiry once you are actually applying for a loan, and your formal consent is required. Note that not all hard inquiries are a sign of accessing new credit lines. Utilities companies and insurers often run hard inquiries too before providing a service, as do many landlords or car rental companies. 

Hard vs. Soft Inquiry

Wherever possible, you should ask a lender or service to restrict themselves to a soft inquiry, which does not require pulling your credit report. As a result, your credit score is unaffected. That might not always be possible, but if you are merely at the preapproval or speculative stage for a financial service or product, all your issuer really needs is a credit score check. You should also make use of any pre-qualification tools the lender provides to establish whether you need or meet the benchmarks for a loan or credit card. 

Otherwise, the key difference between hard and soft inquiries is that your consent is required for the former. Soft inquiries, by contrast, are often made by companies who are pre-qualifying the most attractive leads. If you receive an offer for a new credit card in the mail, for example, there’s a good chance the company has already run a soft inquiry. 

Learn more about hard inquiries here. 

When You Should Absolutely Avoid a Hard Inquiry 

There are some moments in the life of your credit report when even losing five points off your score is too big a sacrifice: in particular, if you’re just starting out on your own financially and building your credit score from scratch. During this period, your focus should be on building payment history and filling out your credit report with accurate, up-to-date information. In that way, when you do start running hard inquiries in search of credit lines, you’ll have your best possible credit score to hand. 

With ScoreMaster’s suite of credit monitoring tools, you can stay on top of your credit score and reduce the impact of each hard inquiry. By regularly monitoring your report, you can also spot any errors or duplicate inquiries before they affect your financial planning. 

References:

CNBC – Do Hard Inquiries Impact Your Credit Score?

Forbes – How Credit Inquiries Affect Your Credit Score

Chase – How Hard and Soft Credit Inquiries Affect Your Score

Fox Business – How Your Credit Score Is Impacted by Hard and Soft Inquiries

CNN – Does Checking Your Credit Hurt YCredit Score?