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What Is A Credit Inquiry? Everything You Need To Know

- Dec 16, 2020 credit0 comments

Credit inquiries aren’t something to cry too much about. Let’s establish what they are, the different types of them, and whether they affect your credit score or not. 

Credit Inquiry

A credit inquiry aka credit pull is when someone requests to have your credit report reviewed. Think of it as an audit- every number is looked at and questioned. There are two types of credit inquiries- hard inquiries and soft inquiries. 

What is a hard inquiry?

A hard inquiry is when a creditor has requested to see your credit history, to gain information on your payment history.

When is a hard inquiry made?

A hard inquiry will usually be done when you request a loan from a lender. That can happen when you apply for a loan, credit card, mortgage, or car loan. 

The lender wants to protect themself from a negligent borrower. By looking at your credit report, they see if you’re on top of paying your credit card bills, auto loan, and the like. 

Hard inquiry effect on score

A question that comes up often is, does a hard inquiry affect my credit score? The short answer is yes and no. (I know, I know- I hate that answer too.)

A hard inquiry will affect your credit score in the short term. It may cause your number to drop slightly, right after the hard inquiry is done. The good news is that it won’t remain like that forever. (Phew!) By twelve months after the inquiry, your score won’t be affected anymore.

The more hard inquiries done, the more your credit score will be affected, though. That’s why you should reconsider applying for a few credit cards at a time, as this results in multiple hard inquiries done at one time. Best is that there shouldn’t be more than 5 hard inquiries in 12 months.

Read: Which credit card issuers will combine same-day credit inquiries

How long does a hard inquiry stay on a credit report?

By two years, your hard inquiry should be off your credit report altogether.

Now, what happens if you applied for a few credit cards, knowing you probably won’t be approved for all? Will the credit inquiry still be on your credit report if you get declined? The answer is that yes, the hard inquiry will still be on your credit report. You’re best off applying for cards that you have a fair chance of getting approved for. 

What is a soft inquiry?

Now, let’s talk about soft inquiries aka soft pulls. A soft inquiry is when you check your credit report, or you allow someone to check your credit (like a potential employer). A soft inquiry also occurs when a lender checks your credit report in order to pre-approve you for an offer. 

When is a soft inquiry made?

Soft inquiries are not done in relation to loans. They’ll usually be done by landlords, potential employers, insurance companies, utility companies or for pre-qualified offers.Those pre-qualified credit card offers you get in your mailbox aren’t numbers that are pulled out of a hat. They’re usually based on your score.

Soft credit check effect on score

A soft inquiry won’t affect your credit score, and they can’t be viewed by anybody but yourself. This is a good thing since soft inquiries are constantly being made.

Inquiries & the three credit bureaus

There are three credit bureaus- credit-reporting agencies- TransUnion, Equifax and Experian. Generally, banks will only pull a credit report from one agency when you apply for a credit card or other loans. As for mortgages, a credit inquiry will be done by all three bureaus. 

Banks won’t do credit inquiries by the same credit bureaus all the time. It differs based on the state and the time period.  On our CC Results Page, people report what credit bureaus their credit was pulled from. When applying for a card, you can search for someone from your state that applied to the same bank within the last few months. Generally, your credit inquiry will be done by the same agency as that person.

What if I found an error on my credit report?

What happens if you get your credit report, and you notice a few inquiries that you weren’t aware about, or that you don’t recognize? This may very well be that someone is misusing your credit report. 

If you notice something amiss on your credit report, call the bank that conducted the inquiry, find out some more information about it, and dispute it if it’s inaccurate. If you fear that your personal information was stolen and someone is opening false accounts in your name, then your best option may be to freeze your credit reports. Check out more details here.

Credit inquiries while you’re rate shopping

Buying a car and a home is not the same as purchasing groceries and clothing. They’re a lot more expensive and call for a lot more decision-making than minor purchases do.  It’s very reasonable to want to “shop around for rates”, to see if one offer will be cheaper than the other. 

That means applying for a few loans at various banks or car dealerships. By applying to a few places, you’re causing multiple hard inquiries to be done, which can be detrimental to your credit score. 

The good news is that with the most-used FICO model, all inquiries that are made within 45 days are considered one inquiry (if you are “rate shopping”). Some older FICO models and various other scoring models will group inquiries made within 14 days of each other. Read more details about rate shopping here.

With all that covered, here’s to wishing you much luck with your credit score, reports, and history! 

Frequently asked questions
Does checking my credit report cause a soft pull?
Yes, when you request to review your report, a soft inquiry will be done. Please note that soft inquiries do not affect your credit score in any way.
Which credit cards do soft pulls?
As far as I’m aware, credit companies will always do a hard inquiry when you apply for a credit card. Amex, however, will often not pull the credit of their existing customers.
Why does a credit inquiry lower my score?
The fact that someone is in need of more credit, leads to the assumption that they are in a financially difficult situation.
When else does a hard inquiry happen, besides for when I apply for a credit card or loan?
When you request a credit limit increase, some issuers may do a hard inquiry. Chase bank does hard inquiries when their customers request a credit limit increase.
Is my consent needed in order for a soft inquiry to be done?
No, soft pulls can be done without your consent. It needs to have a legitimate reason for it, though (for example pre-approving a firm offer of credit, etc).
How much will my score be affected by a hard credit inquiry?
According to FICO, a hard inquiry can shave off up to 5 points off your credit score. If your credit history is solid, though, the number decreased might even be less than 5 points. Or much more then 5 points if there are already multiple credit inquiries on your credit report
How long does a credit inquiry stay on my credit report?
Two years but it only affects credit for up to 12 months

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Sam Sam has nearly a decade's worth of experience educating his many readers on everything credit. Sam spends his days checking out credit cards for a full report, from the minute benefit details to the shebang of welcome bonuses. Plus studying the ins and outs of building proper credit. It’s his favorite pastime and he loves sharing it with others.

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