You may have heard that too many “credit inquiries” can lower your score. This is both true and false – only some kinds of inquiries can lower your score, while others are harmless. Whether you’re applying for a loan or checking up on your own credit score, it’s important to know which kind of inquiry you’re initiating so you can avoid the more damaging ones unless absolutely necessary.
What is a “credit inquiry”?
Anytime someone requests your credit report or score, that is called a “credit inquiry.” Examples of common credit inquiries include:
- When you apply for a credit card
- When you apply for a mortgage
- When an employer conducts a background check
- When you apply to rent an apartment
- When a credit card company determines if you qualify for a card or special offer
- When you check your credit score or request your credit report
The purpose of a credit score – and a credit report, for that matter – is to determine your credit worthiness. A higher score indicates that you have a good history of paying off loans on time without missing payments, and a lower score indicates that you’re more at-risk for defaulting on a loan. This information is useful for all kinds of people, organizations, and corporations. For example, a landlord may want to know if a potential renter has a good history of making monthly payments. Checking your credit is a fairly good indicator of this.
There are two kinds of inquiries: hard and soft.
“Hard” inquiries can lower your score
A hard inquiry may actually knock your credit score down a few points, so they should only be initiated when absolutely necessary. Thankfully, hard inquiries can typically only be done with your permission. These are the inquiries that a bank or lending institution conducts when deciding whether to approve you for a loan (such as a credit card or auto loan) or mortgage.
“Soft” inquiries don’t affect your score
Although soft inquiries are recorded on your credit report, they don’t affect your score.
Soft inquiries are much more common, and they don’t always require your consent. Some examples include:
- Requesting your own credit report
- Getting pre-approved for a credit card offer
- Background checks (such as from an employer or landlord)
It’s important to note that checking your own credit score or report won’t hurt your credit score – so check away! Checking your credit report often is a good way to make sure your credit is in good shape and that you haven’t become a victim of identity theft.
How long do hard inquiries remain on your credit report?
Hard inquiries will hang around on your credit report for two years, at which time they go away. However, even before the two years are up hard inquiries will gradually do less and less damage to your score.
Other credit repair resources
A poor credit score can keep you from getting approved for a loan or a mortgage – here are some tips and tricks for DIY credit repair. To get a professional opinion on your credit health, call Lexington Law for a free, no obligation credit consultation: 1-(855) 620-5875.