If you’re trying to repair your credit, you may be wary of the impact that a hard inquiry can have on your credit score. Hard inquires, or “hard pulls” typically occur when a financial institution checks your credit when making a lending decision. Most hard pulls take place when you apply for a mortgage, loan, or credit card. Most of the time, you have to authorize a hard inquiry, so you should always be aware when one happens. In this article, we’ll take a closer look at hard inquires, what they are, and how they affect your credit score.
What is a Hard Inquiry?
When you apply for credit, you’re authorizing financial lenders to “inquire” for a copy of your credit report from a credit bureau. If you check your credit report later, you may notice that their credit inquiry is listed. A hard inquiry is different from a soft inquiry because it affects your FICO score to a degree.
Common examples of hard inquiries:
- Applying for financing at a car dealership
- Responding to a preapproved credit card offer you get in the mail
- Contacting your credit card company to request a credit line increase
- Applying for a mortgage
Why do Hard Credit Inquiries affect My FICO Score?
Research shows that opening several credit accounts in a short period of time represents a greater credit risk for lenders. If the information on your credit report shows that you have been applying for multiple new credit lines in a short period, your FICO Scores can drop as a result. It’s important to note, however, that multiple inquiries from auto, mortgage, or student loan lenders within a short period of time will not have a noticeably negative effect. These inquiries are typically treated as a single inquiry, as opposed to applying for multiple credit cards within a short time frame.
How Much Will Hard Credit Inquiries Affect My Credit Score?
The impact of applying for credit varies from person to person based on their unique credit history. In general, credit inquiries will have a small impact on your FICO scores. For most people, one additional inquiry will take less than five points off their FICO scores. Inquiries can have a greater impact if you have few accounts or a short credit history. Statistics show that people with six inquires or more on their credit reports can be up to eight times more likely to declare bankruptcy compare to people with zero inquiries.
While inquiries are useful in assessing risk for lenders, they are only 10% of what makes up a FICO Score. It’s much more important to pay your bills on time and reduce your overall debt burden if you’re trying to build or repair your credit.
Need Help Repairing Your Credit?
Working with a credit repair company can help you fix bad credit scores and put you in a position for long-term success with all of your credit-related decisions.
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