What Is a Hard Credit Inquiry?

Your credit score is one of the most important factors that lenders consider when reviewing applications for loans, credit cards, mortgages and other lines of credit. A major component of your score is your history of applying for new credit, known as “hard inquiries.” When you apply for a new credit card or loan, the lender checks your credit report to evaluate your risk level as a borrower. This results in a hard inquiry being recorded on your report. Too many inquiries in a short period can temporarily lower your credit score. However, a single hard inquiry by itself usually does not hurt your score significantly.

This comprehensive guide explains what hard inquiries are, how they affect your credit score, and tips to minimize any negative impacts. With some basic knowledge and prudent management of applications, you can avoid unnecessary hits to your score.

What Exactly is a Hard Credit Inquiry?

When a potential lender checks your credit report to make a lending decision, it is called a “hard inquiry” or “hard credit check”. This occurs when you apply for any type of new credit, including credit cards, personal loans, student loans, mortgages, auto loans, and more.

Hard inquiries involve lenders accessing your full credit report to evaluate your credit risk and make a decision about approving your application. This is different than a “soft inquiry” which does not affect your score at all. Soft checks include when you check your own credit report, a potential employer checks it for hiring purposes, or lenders pre-screen you for pre-approved offers.

Each hard inquiry is recorded on your credit report and visible to other future potential lenders. Too many in a short period raises red flags about your credit hunger and can negatively impact your score. However, a single inquiry is quite normal and alone is unlikely to hurt your score much.

Why Do Hard Inquiries Lower Your Credit Score?

When you apply for new credit, it indicates there is a need to take on more debt. This slightly increases the risk that you may overextend, miss payments, or default. While expected, multiple applications in a short period can make you seem overly credit hungry or desperate, implying you are a riskier borrower.

Most credit scoring models penalize you for having too many hard inquiries in a short period of time. For example, the FICO scoring model will discount your score a few points for each inquiry within a 12-month period. Too many at once can have an increasingly negative effect.

However, a single inquiry alone causes little if any credit score damage. One new credit application over 12 months is normal consumer behavior and no cause for concern. But if you apply for several credit cards at once, multiple personal loans over a few months, or get turned down by several lenders, it throws up red flags. Timing and volume matter.

How Much Do Inquiries Lower Your Credit Score?

Most people have minimal to no credit score decrease from a single hard inquiry. A single inquiry might lower your score by 3 to 5 points according to myFICO consumer credit site, but often has no impact.

However, if you have applied for multiple credit lines in a short period, you may suffer more credit damage. Each additional inquiry can lower your score further by up to 10 points or so. One mortgage lender states that 5 or more inquiries can lower scores by up to 30 points. Much depends on your overall credit profile though. If you have great credit, inquiries have less impact compared to fair credit consumers with the same history of inquiries.

Inquiries can have the biggest impact if you have few accounts or a short credit history. People with several recently opened accounts and numerous hard inquiries should wait 6 months or more before applying again.

How Long Do Hard Inquiries Stay on Your Credit Report?

Hard inquiries remain on your credit report for 12 months, although their impact on your score fades over time. Their influence diminishes significantly after the first 3 to 6 months.

For example, a 6-month old inquiry would only impact your score by 2 to 4 points. After 12 months lenders cannot consider inquiries in their lending decision. But they stay listed on your credit report for 2 years, before being automatically removed. So remain prudent about applying for more credit too soon.

5 Tips to Minimize Hard Inquiry Credit Score Damage

While new credit applications lead to some hard inquiries being recorded, you can take steps to reduce unnecessary credit score damage:

1. Limit Applications to Credit You Truly Need: Do not apply for loans or credit cards you have no intention utilizing. Too many hard inquiries will overly impact your score.
2. Concentrate Applications in a Short Period: Multiple applications within a couple weeks are often counted as one single inquiry. So apply for everything you need soon rather than spreading out applications.
3. Only Apply for Pre-approved Offers: Being pre-qualified or pre-approved means the hard check has minimal impact, as you already passed the lender’s standards. Avoid offers that are only “pre-screened.”
4. Check Your Credit Reports: You can check your own credit reports from the three bureaus once annually without any impact to your score. Monitor it routinely before applying for new credit.
5. Give Time Between Applications: Let at least six months pass before applying for more credit if you had several recent inquiries. Allow negative score impacts time to fade.

Can You Remove Hard Inquiries from Your Credit Report?

You cannot remove valid hard inquiries from your credit report before they automatically expire after two years. If you apply for a loan or credit card, lenders have a legal right to check your credit, resulting in an inquiry.

However, if you find an inquiry from a company you did not apply to or give authorization to check your credit, you can dispute it. Prove it is unauthorized to get credit bureaus to remove it. This is uncommon, but disputes must be submitted in writing and responded to within 30 days.

Should You Worry About a Single Hard Inquiry?

A single hard credit check is normal and rarely lowers scores significantly on its own. As long as you are not taking on excessive debt or have a short credit history, one additional inquiry should not prevent you from getting approved for new credit.

Many people worry about inquiries unnecessarily. According to credit bureau Experian, a single inquiry causes an average score decline of less than five points, often with no change. Just be sure you spaced out your last applications by six months and keep your utilization low on existing accounts. If so, even several points will not prevent approval.

Can You Dispute Legitimate Hard Inquiries?

You cannot dispute legitimate hard inquiries resulting from applications you authorized. Lenders have a right to check your credit when you apply to them for a loan or credit card. This allows them to make a responsible lending decision.

Disputes are only worthwhile if the inquiry is unauthorized or fraudulent. For example, if you find an inquiry from a lender you never applied to or did not authorize to check your credit, you can dispute it. Simply send a written dispute letter to the credit bureau, and the source of the inquiry will have 30 days to verify it is valid. If not verified, the credit bureau will remove it from your report.

Are There Alternatives to Hard Inquiries?

When applying for credit, there are a couple alternatives to having a full-fledged hard inquiry on your report:

• Soft Inquiry: Lenders can check your credit with a soft inquiry when pre-screening you for pre-approved offers. This does not impact your score at all.
• Existing Relationship: Some lenders may evaluate your credit internally without a hard inquiry if you already have a lending relationship with them, like your bank.
• Authorized User Status: Being added as an authorized user to a partner or family member’s credit card avoids a hard inquiry. But it allows helping build your score from their positive history.

Overall though, a hard inquiry is required from any new lender when applying for a loan or credit card. Soft inquiries are only for pre-approvals, not final applications requiring true approval.

Will Closing Old Credit Accounts Help Offset Inquiries?

Closing old credit card accounts will actually hurt your credit scores rather than offset the effects of hard inquiries. Length of credit history and total available credit are big factors in your scores.

Closing accounts shortens your history and decreases total credit limits extended to you. Plus it can increase your credit utilization ratio if you spread the same balances over fewer accounts. So it is best to keep old accounts open. Just contact the issuers to close unused cards to new charges if desired.

Can Inquiries be Removed When Denied Credit?

Unfortunately, lenders’ hard inquiries cannot be removed from your credit reports if you are denied for the credit applied for. All legitimate inquiries must remain on your reports for two years from the date they occurred before being automatically removed.

This allows other lenders you apply to in the future to see your full recent application history and make fully informed decisions about your creditworthiness. If inquiries were removed when applicants are denied credit, it would eliminate important information future lenders need to see.

Key Takeaways

• Hard inquiries occur when lenders check your credit report while considering applications for loans or credit cards. Too many in a short period can negatively impact your credit score.
• A single hard inquiry causes little to no credit score damage for most people. You typically need several within a few months for more significant impact.
• Hard inquiries fall off your credit report after 12 months, but their negative influence on your score fades after about 6 months.
• Checking your own credit report or being pre-screened for pre-approved offers results in only a soft inquiry, not impacting your score.
• Limit applications to credit you truly need, and allow 6 months between applications if you’ve had several recent hard inquiries.
• Multiple applications within a couple weeks are often counted as one inquiry, so consolidate your credit applications.
• Only apply for pre-approved offers to avoid unnecessary hard inquiries from lenders.
• Maintain low credit utilization and a long credit history to offset minimal inquiry impacts.
• Dispute any unauthorized hard inquiries that you did not initiate nor provide consent for.
• Do not close old accounts just to help offset inquiries, as it shortens your length of credit.

The main takeaway is that a small number of periodic hard inquiries are normal and expected as you apply for credit. With responsible application timing and credit limits, they should have little impact on strong credit scores. Monitor your reports, limit unnecessary applications, and let inquiry impacts fade over time.

Frequently Asked Questions

Q: How long do hard inquiries stay on your credit report?

A: Hard inquiries remain on your credit report for 12 months, although their negative influence on your score fades over time. After one year, lenders can no longer consider inquiries in making lending decisions.

Q: About how many points can a single hard inquiry lower your credit score?

A: A single hard inquiry typically only lowers a credit score by 3-5 points and often has no impact. Multiple inquiries in a short period can have a greater effect, around 10 points per additional inquiry.

Q: Do soft inquiries from checking your own credit report lower your scores?

A: No, soft credit inquiries like checking your own credit report or being pre-screened do not impact your credit at all. Only hard inquiries from lenders when applying for new credit may lower it.

Q: Is it advisable to dispute legitimate hard inquiries?

A: No, you should not dispute hard inquiries resulting from actual applications you made, as lenders have a right to check your credit. Only dispute unauthorized inquiries.

Q: How can you check your credit report without impacting your scores?

A: You can check your own credit reports directly through Equifax, Experian, and TransUnion once per year without hurting your scores. This results in a soft inquiry only.