How Many Points Does a Hard Inquiry Affect Your Credit Score?

Whenever you apply for a new credit card or a personal line of credit, the lender or credit card issuer will check your financial history to see if you are a good candidate for their products. To do that, lenders will perform a hard check on your credit. This can, in fact, change your credit score, so it's important to understand just how impactful that change can be.

Hard vs. Soft Credit Inquiry

A credit inquiry is a request that potential lenders, employers, and landlords send to consumer agencies (Experian, Equifax, or TransUnion) to check your credit score. Credit inquiries or credit pulls help lenders assess your creditworthiness based on your previous usage of credit.

Not all credit checks affect consumers’ credit scores. There’s a difference between hard inquiries and soft inquiries.

What Is a Hard Credit Inquiry?

A hard inquiry (also known as a hard credit pull) is requested from a consumer agency every time you apply for a loan, credit card, or other financial product. A hard credit check will impact your credit score.

Hard inquiries are performed by lenders, banks, or other financial institutions that want to check your financial behavior and see whether you are a risky borrower or not. These credit checks will show up on your credit report, but legally they can’t be performed before your approval.

Although a credit score drop can be only a few points, it can influence the repayment terms, especially if you already have bad credit. Of course, there are personal loans for borrowers with bad credit that still come with slightly more affordable monthly rates.

What Is a Soft Credit Inquiry?

A soft inquiry or a soft pull is a credit check that will not lower your credit score points. Employers and landlords will do a soft inquiry as a part of your background check. Many credit card issuers and lenders offer pre-approval checks which require only a soft pull.

It’s a good way to check if you qualify for a specific product since you’ve got nothing to lose in this case.

How Hard Inquiries Affect Your Credit Score

Typically, when someone does a hard inquiry on your credit, your credit score will drop by five to 10 points. This number can be even lower than five points depending on various elements that constitute your credit report, such as your history of repayment, credit utilization, and so forth.

According to FICO, a credit inquiry results in less than five points for most consumers. The better your credit history, the fewer points will be taken from your credit score. Moreover, a credit score drop is not permanent, and it will increase again within a few months if you take care of your finances.

Hard inquiries show on your credit report for two years, but they won’t impact your credit score after one year or less. If you pay your bills on time and responsibly manage your finances, you can expect a credit score increase already a few months after a hard credit check, unless you authorize another hard credit check during this period, of course.

In most cases, credit scoring models (like FICO or VantageScore) won’t show the impact of hard inquiries after a year, but if it happens or you can’t wait for hard inquiries to disappear from your account, you can opt for credit repair services. Credit repair companies work on removing hard inquiries and increase your credit score faster.

Do Hard Inquiries Always Impact Your Credit Score?

There is a situation when a hard credit check won’t affect your credit score, even if you perform multiple credit checks in a short period. It happens when you apply for the same product with different lenders.

If you’re shopping for the most affordable rate and the best repayment terms for a personal loan, it’s expected that you’ll visit multiple lenders, which will result in multiple credit checks.

In this case, you don’t need to worry about losing points. Most scoring models recognize the purpose of this type of multiple inquiries, and they set a grace period that can range between two weeks and 45 days, depending on the model.

For example, the new FICO scoring model has a 30-day grace period for mortgage, car loan, and student loan inquiries, meaning that it’ll ignore all inquiries made during this period.

Moreover, FICO recognizes and counts older inquiries as one in a 45-day grace period. Another scoring model, VantageScore, will count multiple inquiries if made within 14 days since the first inquiry.

Should You Be Worried About Hard Inquiries?

Hard credit inquiries account for the smallest percentage of your overall credit report. In the FICO scoring model, only 10% of your credit score is reserved for hard pulls. In most cases, it’s less than 10%. VantageScore is also flexible when it comes to hard inquiries. Altogether, they are not an essential category in the total score.

Of course, it doesn’t mean you should be less cautious with hard inquiries.

Multiple hard inquiries in a short period can impair your credit. If you’ve just got a personal loan and plan to apply for a mortgage, expect another hard inquiry.

The points on your credit score will drop for a few more, and you might have difficulties qualifying for better rates. To avoid this situation, you might consider applying to lenders who offer loans without hard credit checks.

Bottom Line

Hard credit inquiries are usually a part of the application procedure for most financial products and services. It’s a way for lenders and credit card issuers to check if you are prepared for a new financial responsibility.

However, a credit inquiry is not the only thing that affects your credit score. In fact, it takes only 10% or less of the total score. Much more goes on your payments, about 35%.

That’s why you shouldn’t generally be too worried about their credit impact. Instead, focus on other, more significant aspects of your credit history to improve or maintain your score.