How Do Credit Inquiries Affect My Credit?

An inquiry occurs when your credit report is pulled. This may happen when you apply for a new credit card or take out a personal loan. There are two types of inquiries that assess your report: hard inquiries and soft inquires. Here, I have broken down the difference between the two and how they can influence your credit score.

Hard Inquiries

Hard inquires can have a negative impact on your credit score. This type of inquiry generally occurs when a financial company or lender checks your credit report. This can be for a mortgage, student loan, credit card or auto loan. For example, you may apply to take out a loan with a private lender and before the lender approves you, they’ll want to make sure your finances are intact.

Hard inquires may initially lower your credit score by a few points, but the important thing is to not worry. A credit score fluctuates often. It is important to work on maintaining good credit and making sure all of your payments are made on time.

Still, you should always be cautious of how many hard inquires you have in a short amount of time. It’s a good idea to avoid applying for several credit cards at once, as this can negatively impact your credit. Also, having several credit cards could put you at risk for winding up in debt if you don’t manage them responsibly.

Removing a Hard Inquiry You Didn’t Approve

If you see a hard inquiry on your credit report that you weren’t aware of, you may want to consider calling the creditor to let them know you did not approve it. In most cases, they will conduct a brief investigation and remove it.

Just like any error on your credit report, you can also dispute inquiries. You can do this by filing a dispute directly with the credit bureaus and stating your case. It is important to keep your finances in shape and maintain good credit, so if you ever see an error or incorrect inquiry, you’ll know to take action. (Unfamiliar hard inquiries could also be a sign of identity theft.)

Soft Inquiries

Soft Inquires, on the other hand, aren’t generated by shopping for credit. They most often occur when an outside company or person wants to perform a background check. This will typically put a soft inquiry on your credit report, letting you know the action took place. However, this will not lower or damage your credit score. While hard inquires require your permission, soft inquires often do not. Don’t be alarmed — this shouldn’t affect your credit score in any way!

Another example of a soft inquiry is pulling your own credit score (which you can do for free on Credit.com). Keep in mind, checking your credit score will not hurt your credit score. Other soft inquiries can include pre-approval for credit cards, inquiries generated by an employer or inquiries generated by an insurance company.