The Effect of Credit Inquiries on Your Credit Score

The Impact of Credit Inquiries on Your Credit Score

Your credit score is one of the most important pieces of information about you. It is used by lenders, employers, and landlords to determine your creditworthiness and your ability to pay back loans and other financial obligations. A credit inquiry is a request for your credit report. It is usually done when you apply for a loan or credit card. Credit inquiries can have a negative effect on your credit score, but there are steps you can take to minimize the damage.

When you apply for a loan or credit card, the lender will request a copy of your credit report from one of the three major credit bureaus: Experian, Equifax, and TransUnion. The lender will then review the information in your credit report to determine if you are a good candidate for the loan or credit card. This process is known as a “hard” credit inquiry.

A hard credit inquiry can have a negative impact on your credit score. It can cause your score to drop by a few points, which can make it more difficult to get approved for a loan or credit card.

Types of Credit Inquiries

Not all credit inquiries are created equal. There are two types of credit inquiries: hard inquiries and soft inquiries.

Hard inquiries are initiated by lenders when you apply for a loan or credit card. These inquiries can have a negative impact on your credit score.

Soft inquiries are initiated by lenders when you request a copy of your own credit report or when a lender checks your credit report for promotional purposes. These inquiries do not have a negative impact on your credit score.

Hard Credit Inquiries

A hard credit inquiry is initiated by a lender when you apply for a loan or credit card. The lender will review your credit report to determine if you are a good candidate for the loan or credit card. These inquiries can have a negative impact on your credit score.

When a lender initiates a hard credit inquiry, it will remain on your credit report for two years. However, the impact of the inquiry will diminish over time. After the first year, the inquiry will have less of an impact on your credit score.

How Many Credit Inquiries is Too Many?

The number of credit inquiries on your credit report can have an impact on your credit score. Generally, it is best to limit the number of credit inquiries on your credit report.

If you have more than six inquiries in the past 12 months, it could have a negative impact on your credit score. This is because lenders view multiple inquiries as a sign of financial instability.

Do Multiple Credit Inquiries Count as One?

No, multiple credit inquiries will count as multiple inquiries. Even if you apply for multiple loans or credit cards at the same time, each inquiry will be counted separately. This means that each inquiry will have an impact on your credit score.