What is a hard inquiry, and how does it affect your credit score?

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Are you considering a new credit card or financing a major purchase? When you apply, lenders will check your credit — a process called a hard inquiry. While this can cause a slight dip in your credit score, don’t let that deter you. The impact of a hard inquiry is typically minor and temporary.

The key is strategic timing: spacing out your applications can help minimize the overall effect on your credit score.

What is a hard inquiry?

Whenever you apply for a new loan or credit card, the lender behind these products will check your credit score and credit reports. This is known as a hard inquiry or hard pull.

Examples of hard inquiries include:

• Applying for a new credit card
• Requesting a credit limit increase
• Applying for a mortgage
• Applying for an auto loan
• Applying for a personal loan

Lenders want to see if you've been good about paying your bills on time. They are more likely to approve you for a credit card or loan with a lower interest rate if your credit reports show that you pay your bills on time each week and aren’t already overburdened with debt.

What is a soft inquiry?

Soft inquiries, on the other hand, don't affect your credit score. Soft inquiries usually happen when either you check your credit or someone else does without you directly applying to them for a new loan. An example of a soft inquiry is checking your credit reports at AnnualCreditReport.com or via a third-party service like Credit Karma. Checking your credit will not cause your credit score to drop, even temporarily.

The same holds true if a credit card provider checks your credit before sending you an offer for new credit. Because you didn’t apply for a new card and the provider checked your credit, this is a soft inquiry that won’t cause your score to dip.

Hard inquiry vs. soft inquiry

How hard inquiries impact your credit score

A hard inquiry usually has a minor impact on your credit score. According to FICO, a single hard inquiry will cause most people’s credit scores to drop by less than five points. However, multiple inquiries in a short period can have a more significant effect. For example, applying for three credit cards and two personal loans within two weeks could potentially lower your score by up to 25 points.

There’s an important exception to this rule. Experian notes that depending on the credit-scoring model, you won’t be penalized for rate shopping on a single type of loan within a 14- to 45-day period. For instance, if you apply with three mortgage lenders in 10 days, the credit bureaus will treat this as one inquiry rather than three.

Hard inquiries remain on your credit reports for two years, though their impact lessens over time. Capital One notes that some credit-scoring models only consider inquiries from the last 12 months. Your credit score can recover quickly if you maintain good financial habits, such as paying bills on time and keeping your credit card balances low.

“Borrowers should not let the fear of a small, temporary dip in their credit score deter them from applying for necessary credit,” says Cameron Burskey, managing director of retirement security at Cornerstone Financial Services. “The benefits of obtaining needed financing usually outweigh the minor, short-term impact on their credit score.”

While hard inquiries can affect your credit score, they're just one piece of the puzzle. Credit scoring models like FICO consider five main factors:

1. Payment history (35%)
2. Credit utilization (30%)
3. Length of credit history (15%)
4. Credit mix (10%)
5. New credit inquiries (10%)

Hard inquiries fall under the 'new credit' category, which accounts for about 10% of your FICO score. This means that while hard inquiries matter, other factors like paying bills on time and keeping credit card balances low have a much larger impact on your overall credit health.

Why you should avoid applying for too much credit at once

Lenders view multiple inquiries in a short time as risky because it might suggest you're seeking credit or taking on more debt than you can handle. This could indicate financial stress, making you a higher-risk borrower.

Too many credit applications in a short period could cause your score to drop more drastically, or lead to application rejections.

It’s important to monitor your credit reports regularly for unauthorized hard inquiries, as these could indicate identity fraud. You can access free weekly credit reports from Experian, Equifax, and TransUnion at AnnualCreditReport.com.

When hard inquiries are necessary

While too many hard inquiries in a short period could damage your credit score, there are times when they are necessary. When you apply for a loan, the lender will always do a hard inquiry.

If you need to finance the purchase of a car, take out a mortgage to buy a home, or rely on student loans to fund your college education, hard inquiries will show up on your credit reports. The same is true if you want to apply for a new credit card.

It takes some planning, but spacing out your credit applications can help lessen the effects on your credit score.

Sometimes a hard inquiry isn’t necessary, and you should avoid them. This includes:

• Applying for store credit cards just to get a one-time discount
• Repeatedly applying for credit cards you're unlikely to qualify for
• Allowing a car dealership to submit your application to multiple lenders without your explicit permission

Disputing and removing hard inquiries

You can’t remove legitimate hard inquiries from your credit reports, but you may find hard inquiries for loans or credit cards on your credit reports that you didn’t apply for. This could be a sign of identity theft, such as someone using your Social Security number, birth date, or address to apply for loans or cards in your name.

You can dispute these illegitimate inquiries with the three national credit bureaus and request that the bureaus remove them from your reports. To do this, file a dispute with the bureau or bureaus that lists incorrect information. You can do this online at:

• Experian dispute center
• Equifax dispute center
• Transunion dispute center

How to minimize the impact of hard inquiries

There are several ways to lessen hard inquiries' damage to your credit score.

• Be selective about credit applications: Don’t apply for several new credit cards at once or during a short period. Each of these applications will result in a hard inquiry, and each of those inquiries can drop your credit score by up to five points. Instead, only apply for new credit when you need it.
• Monitor your credit reports: Regularly check your credit reports from Experian, Equifax, and TransUnion at AnnualCreditReport.com. Then, search under the “Inquiries” sections of these reports for any inquiries listed for credit cards or loans you don’t remember taking out. If you find suspicious inquiries, dispute them with the credit bureaus listing them.
• Maintain a strong overall credit profile: A hard inquiry will have less impact on your score if you’ve already built a strong credit history. This means paying your bills on time each month and paying down as much of your credit card debt as possible. Building a solid credit profile mitigates the damage caused by hard inquiries. 

Frequently asked questions

The bottom line

Hard inquiries are a standard part of the credit application process and are important in helping lenders assess risk. While they can cause a slight, temporary dip in your credit score, this impact is typically minor and short-lived. Approach new credit applications strategically, shop around, and focus on your overall credit health.

Editorial disclosure: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.