What Is a Hard Inquiry?

You may have heard that a hard inquiry can hurt your credit score. But you may not be sure what that means — what is a hard inquiry anyway? Hard inquiries are created when you apply for credit. They can potentially drop your credit scores, which can result in higher interest rates when you borrow. And that may mean you will end up paying more over the life of the loan.

What Is a Credit Inquiry?

An inquiry is created when your credit report is accessed by a business. Let’s say you apply for a car loan, and the lender requests your credit report and score from Experian. The fact that your credit information was used by a particular company will be noted on your Experian report with the date, name of the company that requested it, and the type of inquiry that was made.

New credit, which includes inquiries as well as new credit accounts, makes up just 10% of your FICO score. While inquiries remain on your credit reports for two years, only those within the past year count, at least with the majority of score models used these days. Older ones are ignored.

What Is a Hard Credit Inquiry?

Hard inquiries, otherwise known as hard pulls, can affect your credit scores greatly. They show you have applied somewhere to get credit, whether that’s a car loan, mortgage, student loan or credit card. Each of these credit checks counts as an inquiry and indicate a lender has reviewed your credit because you have applied to borrow from them.

A hard credit inquiry can typically drop your credit score by between five and ten points which can seriously affect your overall credit score. Be mindful of the credit you are applying for and how many times you are applying because each inquiry will be added, and you will then have multiple inquiries listed on your credit report.

However, if you have multiple hard credit inquiries from the same company such as an auto, mortgage, or student loan lender in a short amount of time, they will not affect your credit score as greatly.