A credit inquiry is when a creditor (such as Visa, a bank, a landlord) pulls your credit report. Lately, people have been asking me how much this hurts their credit score and why. Here are the facts.
Too Many Hard Inquiries Hurt Your Score
A hard inquiry is when you apply for credit. If you applied for three credit cards during the holidays in order to save on your purchase, your credit score has been hit. Why? Because the credit bureaus do not know how you are going to use this new credit, whether or not you will max out your cards, or if you will pay on time. Also, when a person suddenly applies for a lot of new credit, it is a concern as to whether or not they will be able to afford the new, upcoming bills. Therefore, your score is temporarily lowered for six months until you have established your record with these new cards.
The Exception: When Hard Inquiries Will Not Hurt Your Score
On the contrary, you can apply for a mortgage or car loan with three companies in a short time span (less than 45 days) without it hurting your score. Why? Because the credit bureaus do not think you are getting ready to buy three new houses or cars. They assume you are shopping for the best deal.
That said, if you have six or more mortgage inquiries, it is going to raise a red flag to the underwriter approving your loan. Why? Because, as I explained in Mortgage Rip-Offs and Money Savers, shopping three lenders is sufficient. If you apply for a mortgage with many lenders, it looks like everyone is turning you down. That makes other lenders ask why no one wants to lend to you. You will then need to write a letter of explanation for your loan file.
Soft Inquiries Do Not Affect Your Credit Score
A soft credit inquiry is any of the following:
- You request your own credit report.
- An employer pulls your credit report.
- Your current credit card company looks at your credit report to check how you are managing your credit. (Yes, they have the legal right to do this.)
- Creditors troll your credit report to see if you are a good candidate to send a solicitation to. (To stop this annoying practice, go to http://www.optoutprescreen.com and get off creditors’ mailing lists.)
Don’t concern yourself with soft credit inquiries. They do not hurt your score in any way.
Unauthorized Hard Credit Inquiries
It is illegal for any creditor or lender to pull your credit report without your knowledge and consent. As a licensed, ethical loan officer, I ask every person who wants to get pre-approved for financing to give me their permission to order their credit report before I do so. And then, I make a record of this permission, whether it was by email, in writing on a form, or verbally, with the date. Other ethical loan officers do the same.
If a mortgage lender, bank, credit union, credit card company, or other loan company pulled a hard inquiry on your credit report without your permission, you have the legal right to have that inquiry removed from your report so that it does not harm your score.
First, contact the creditor to make sure you are correct about the hard inquiry. Then if they cannot provide you with your consent verification, ask them to send you and the credit bureaus a signed letter on company letterhead that requests the inquiry to be removed.
How Much Do Inquiries Lower Your Score?
The credit bureaus claim that an inquiry impacts your score only by about five points. However, in real life, it’s a different story.
One credit repair specialist tells me he has seen credit scores lowered by 15 points after several hard inquiries (such as multiple credit card inquiries). Another credit repair specialist said he saw a client’s credit score increase by 24 points after unauthorized hard inquiries were removed.
The higher your credit score, the more inquiries impact your score, because there are not other factors such as late payments and collections docking your score.
If you have a low credit score due to negative credit, then inquiries are the least of your worries. Work on establishing on-time payments and lowering your credit card balances to below 30% of the limit first, because those are your priorities.
For more information about how credit attorneys and certified credit repair specialists legally delete bad credit and restore your good name, please see here.
Thank you for reading my blog. I do my best to inform people of the facts about achieving “A” credit, because the American finance system is dependent on credit. Unless you are wealthy and will pay cash for everything — including a home — having a good credit score is essential.
2 thoughts on “Are Credit Inquiries Hurting Your Credit Score?”
It should be illegal for any credit bureau to drop your score due to any inquiry. Let’s think about this a second. Fact 1. You were not late on any payment. Fact 2. You have continued to pay as agreed. Fact 3. Simply applying for credit has not changed your debt to income ratio. Fact 4. If you become irresponsible with your credit it will be reported to the credit bureaus , then and only then should it ever affect your score. Fact 5. Consumers are in reality being punished for trying to get credit. What a bunch of nonsense. Without credit we wouldn’t even need the bureaus. Fact 5. Many consumers pay their bills on time for years, why are they punished for simply inquiring? If you become late or unable to pay you will get a lower score. Lowing a score for any and all inquiries should be illegal. If you don’t pay, your score will go down anyway, this seems like double jeopardy to me. i am sure millions of consumers would agree with this reasoning.
Thank you for weighing in. I think many Americans will agree with you.