How Credit Inquiries Affect Your Credit Score

What is a Credit Inquiry?

Before we get into how a credit inquiry affects your credit score, let’s briefly go over what it is exactly. A credit inquiry is a request made by an institution for credit report information from a credit reporting agency. This is done by lenders to check on your credit history before making a decision on lending you money for a house.

The Difference Between Soft Inquiries and Hard Inquiries

As far as credit inquiries go, there are soft inquiries and hard inquiries. A soft credit inquiry is when you request your personal credit report. This is also used by credit-aggregating services to help you find a loan that’s suitable for you based off your credit score. Soft inquiries do not affect your credit score.

A hard inquiry is when a financial institution checks your credit when making a lending decision. This is done when you apply for a mortgage, credit card, or other type of loan. The hard inquiry will provide your lender with a full credit report. This includes your credit score as well as details on your credit history.

Unlike soft inquiries, hard inquiries can be harmful to your credit score. Typically, a single hard inquiry won’t do much to your credit score. However, for example, if you were to apply for multiple credit cards at once, or even within a few months of one another, this is a different story. When you have multiple hard inquiries in a short amount of time, lenders may view you as a high-risk borrower.

How Many Hard Credit Inquiries is Too Many?

Firstly, you’ll want to take a look at your credit health. If it’s in good shape, a hard credit inquiry could lower your score by a few points, but it’s nothing to be concerned about. Typically, over two hard inquiries in a short period of time is what you’ll want to avoid.

We recommend regularly taking a look at your credit report to ensure there aren’t any errors. For example, there could be hard inquiries that have occurred without your permission. If you find any mistakes, you can dispute these with the credit bureau.

Ready to start the homebuying process? Contact Team Crescenzo today to get started!