How Much Does Applying for Credit Really Hurt Your Credit Score?

If you’re considering applying for a new line of credit, you may have heard that doing so may affect your credit scores. But how much of a hit will your scores really take?

“It’s typical for the score to drop 5 to 10 points,” after a hard credit inquiry, said Jeff Richardson, a spokesperson for credit scoring company VantageScore Solutions, in an email.

But, of course, there’s a bit more to it than that.

How Applying for Credit Can Affect You

With hard inquiries “different impacts can occur, depending on score factors that evaluate how long you’ve been using credit and whether your credit report includes any late payments,” according to an email from Barry Paperno, a credit scoring expert who worked at FICO for many years and now writes for SpeakingofCredit.com.

An inquiry’s effect on your credit score also depends on what you’re applying for. Many scoring models will combine multiple mortgage, auto or student loan inquiries to allow consumers to shop around for the best rate, without worrying about each inquiry dinging their score, Paperno explained. Depending on the scoring model, that “rate shopping” period, in which multiple inquiries will count as one, can be between 14 to 45 days. That doesn’t cover credit cards, though.

“[E]very inquiry resulting from multiple credit card applications can take additional points off of your score, typically about five points or less for each,” Paperno said.

Shop Around

Both Richardson and Paperno suggested all consumers shop around for credit in order to help minimize the damage inquiries cause to your scores.

In terms of credit card applications, Paperno said doing your homework before you apply will give you an understanding of the qualifications different cards have ahead of time. “This way you can avoid applying for a card that requires a high score when you have a low one and avoid being left with only a rejection letter and hard inquiry that could affect your score.”

Be Strategic

It’s a good idea to only apply for credit when you need it, Richardson said. You may also want to consider any major purchases you may have coming in the near future that could be affected by having recent inquiries on your credit report.

“If there is any likelihood of a mortgage application in the not-so-distant future, don’t take a chance on lowering your score by applying for any new credit until after closing on the home,” Paperno said. “On the bright side, however, the score tends to be rather forgiving of negative new account impacts, with any such harm tending to lessen after about six months of history.”

Keeping an Eye on Your Credit

After applying for credit, your score may drop. But this dip isn’t permanent. Richardson said, “assuming balances are kept low and no payments are missed, the score should recover and perhaps improve over time.”

The first step to knowing how your credit has been affected by inquiries is by reviewing your credit reports. You can get your free annual credit reports from AnnualCreditReport.com. There, you can get copies of your reports from each of the three major credit bureaus — Equifax, Experian and TransUnion — as each one may have different information on it. You can monitor how your credit is doing as time passes by viewing two of your credit scores for free, updated every 14 days, on Credit.com.