Credit score secrets: What you need to know about hard inquiries

It’s smart to want to protect your credit standing and avoid actions that could have a negative impact on your score. Understanding how inquiries work is a great way to stay in control of how they affect you.

Let’s explore how hard inquiries work and their potential impact on your credit and personal finances.

What is a hard inquiry?

A hard inquiry is when someone checks your credit because you applied for something. When you applied, you gave them permission to inquire into (request to view) one or more of your credit reports. This process also goes by the names “hard credit check” and “hard credit pull.”

Hard inquiry vs. soft inquiry: what’s the difference?

A hard inquiry comes from a credit application and could lower your scores a little.

Some lenders use a soft inquiry to let you check your options by getting prequalified. A soft inquiry doesn’t affect your credit scores, and prequalification isn’t the same thing as an actual application.

How does a hard inquiry affect your credit score?

When you apply for credit, the lender’s inquiry could impact your credit scores. Your credit score could go down by a few points.

FICO credit scores, the most common one that lenders use, only consider hard inquiries from the past 12 months. Some lenders use VantageScore credit scores, which factor hard inquiries into your scores for up to 24 months. Each lender chooses which credit score version to use.

Hard inquiries don’t cause a huge impact (usually a loss of fewer than 5 points on FICO credit scores and 5 to 10 points on VantageScore credit scores, according to Experian), and after two years, they fall off your credit report altogether.

Hard inquiries could affect your eligibility for the credit that you want. Even if your credit score is otherwise high enough to qualify, a lender could deny your application because you have too many hard inquiries. Applying for a lot of credit could signal financial distress.

Should you avoid a hard inquiry when shopping for a loan?

It’s a good idea to seek out lenders that don’t use a hard inquiry when you’re still deciding whether to borrow money from them. Some offer prequalification for loans based on a soft credit inquiry instead. Soft pulls don’t impact your credit score.

If you’re looking for a loan of any kind, check with lenders that offer this option. This strategy could give you an idea of how much money you might be approved to borrow (and the interest rate and fees you'll pay) without harm to your credit score. For example, you can prequalify for a personal loan through Achieve with a soft inquiry.

Pro tip: Any time you check your own credit, it’s a soft inquiry that doesn’t hurt your score.

When is a hard inquiry necessary?

If you’re borrowing money, a hard credit inquiry is unavoidable. Even if you apply for prequalification with a lender using a soft credit check, when you formally apply for the loan, the lender will pull your credit report. In other words, a hard inquiry.

You’re likely to undergo a hard credit inquiry when you:

• Apply for a loan (including personal loans, auto loans, student loans, and mortgages)

• Apply for a new credit card or line of credit

• Ask for a credit limit increase

• Sign up for new cell phone service

• Lease a car

A card issuer might run a hard inquiry when you request a higher limit, so ask the company which type it uses before you apply for a line increase.

An occasional hard inquiry on your credit report isn’t a big deal in most cases.

How to minimize the impact of hard inquiries

While a hard credit inquiry might ultimately be unavoidable in the course of getting a loan, you can lower the impact on your credit score by following these tips.

Rate shop for mortgages, student loans, or car loans

It’s a smart move to talk to multiple lenders to get the best deal. You might assume that applying with four or five home equity loan lenders could equal a loss of 20 or 25 points from your credit score—yikes!

Not necessarily.

If you make all your applications for a mortgage, auto loan, or student loan within a rate-shopping window (45 days for newer FICO Score versions, 14 days for VantageScore), all of the applications with the same category of lender will be treated as one hard credit inquiry where your credit score is concerned.

You might not know which score version a lender picks, so keep your rate shopping within two weeks, just to be safe.

Note that FICO doesn’t combine separate hard inquiries if you shop around for rates on other things, like credit cards or personal loans. The credit bureaus can see what kind of lender checked your credit. Only mortgages, student loans, and car loans get a rate shopping window.

Monitor your credit score and reports

Keeping an eye on your credit profile is a good idea if you’re concerned about the impact of hard inquiries. You can sign up for free credit monitoring with a bank or credit card issuer you already do business with. You can also get your credit reports for free every week at AnnualCreditReport.com.

If you find an inquiry you don’t recognize, it could be a sign of fraud or identity theft. Someone may have opened an account in your name, and you can reach out to the lender to close it.

You can also check your credit report for soft inquiries, which don’t impact your credit score—but could indicate that someone is shopping for loan preapprovals in your name. When you get credit card and loan solicitations in the mail, those all come with a soft inquiry. When you check your own credit, that’s also a soft inquiry. If you notice a list of soft inquiries on your credit reports, it’s not necessarily because of a nefarious reason.

Pro tip: If you don’t want creditors to do soft inquiries and send you preapproved offers, you can opt out at optoutprescreen.com.

How to dispute a hard inquiry you don’t recognize

You can dispute a hard inquiry that’s an error or the result of fraud. These steps follow the same process you’d use to dispute credit report errors.

• Call the company listed for the inquiry and ask which application it came from. Their answer tells you whether you have a mix-up or fraud.

• File a dispute with the credit bureau that shows the inquiry and with the company that reported it.

• Expect the bureau to finish its investigation within 30 to 45 days.

• Learn how to report identity theft if the inquiry came from fraud. You’ll start at IdentityTheft.gov.

Focus on credit-positive actions

A few major factors impact your credit score. Focusing on them puts you in a better position to build and maintain a good credit standing, even if you occasionally lose a few points to a hard credit inquiry.

For example, your payment history has the biggest impact on your credit score. The amounts you owe to creditors, especially on credit card accounts, is another huge factor. Paying your bills on time and paying down debt tend to naturally lead to good credit.

Achieve is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.

What’s next?

• Check your credit report for accuracy—make sure your name and other identifying details are correct, along with your credit account information.

• Find lenders like Achieve that let you prequalify with a soft inquiry before formally applying to borrow money from them.

• Rate shop for car, student, and home loans in a 14-day window to minimize the negative impact of hard inquiries.

Find out if you prequalify.