The Oasis Firm - Credit Repair Services and Tax Preparation

How Many Points Does a Hard Inquiry Take Away From Your Credit Score?

WhatsApp Image 2021-10-15 at 2.15.43 PM

Your credit score is one of the most critical aspects of your financial life. It affects whether you will qualify for a mortgage, car loan, or personal loan, and it also impacts what interest rates you’ll be offered on those loans.

A hard inquiry into your credit rating can lower it by 5-10 points.

 

What Do You Need To Know About Credit Injury?

Hard inquiries that are made on your credit score, such as applying for a new line of credit or getting preapproved for a mortgage loan, will typically only impact your score by five to ten points.

Another inquiry may result in an even lesser effect on your credit rating. For example, the more recent the last time you applied for an account is when the inquiry is reported; the less it will impact your score.

When applying for a car loan, mortgage, or personal loan, there may be multiple inquiries made on your credit report by all of the lenders you apply to. This can add up and further decrease your credit score by five points per additional inquiry within 14 days.

If you plan to apply for multiple accounts within a short period, it may be best to space out the inquiries over several months, if possible. However, if this isn’t an option, make sure that all applications are spaced at least 30 days apart from each other so they don’t impact your credit score as much.

 

What is the Difference Between a Soft and Hard Credit Inquiry?

You need to know that there are two types of credit inquiries, hard and soft. Soft credit inquiries occur when you check your score or inquire about a loan you have already been preapproved for.

A soft inquiry will not impact your score because it is viewed as internal use of the data by yourself. However, if someone else checks your score or pulls your report, that is a hard inquiry, lowering your credit rating.

On the other hand, a hard Inquiry is a direct inquiry from lenders when you apply for credit. This is the one that will cause your score to drop, and it’s typically done at least every few years.

Some of the known hard credit inquiries include:

  • Applying for a particular job or position
  • Setting up a new account on a cell phone
  • Applying for your first credit card
  • Leaving an auto finance company or dealer early after you have signed the paperwork.
  • Home rental or lease application
  • New mortgage or home loan
  • Background check completion

 

How Much Does An Inquiry Hurt Your Credit?

Hard inquiries show up on the report as “Requests For Applicant’s Report” and can impact your credit by five to ten points for each one.

If you have multiple requests for your report in a short period, that will impact your score by as many as thirty points.

When you are looking into getting a loan for your home, car, or other expenses, it helps to know how much an inquiry will hurt your credit score so that you can plan accordingly. In addition, this allows you to have more control over what impact it has on your financial future and whether or not another hard inquiry is worth it to you.

How much the inquiries hurt your credit score will depend on what type of credit is being requested, the number of requests made in a short period, and overall activity on the account.

If you have an otherwise good payment history with no missed payments or other negative marks, it can help your scores for the first twelve months.

Your overall creditworthiness will also play a role in the impact of an inquiry, so it is essential to keep that in mind when looking at new offers for credit or other financial opportunities.

If they have no late payments, your scores might not be hurt much by inquiries if done carefully over time.

Many people make the mistake of thinking that they need to apply for all their credit at once, but this is not true as it does no good for your score either way.

 

Rate Shopping: What You Need To Know

There is a way to check the interest rate to see if you can get a better deal on your loan. Rate shopping allows borrowers to quickly and easily compare rates from multiple lenders without having to pull each credit report or fill out the same application repeatedly.

An average of three points come off someone’s FICO score for every hard inquiry they make, but it varies depending on how much time has passed since the last query. For example, if you make an application for a new credit card or loan today and then apply for another one next week, each of those inquiries will result in two fewer points off your score than if they were consecutive hard inquiries.

If you only make one hard inquiry at a time, your score will stay precisely the same. However, suppose you pull your credit report for another lender within 30 days of that previous application or update an account with that creditor (e.g., change the balance on your account). In that case, it’s considered to be part of the original transaction and is counted as only one inquiry.

Hard inquiries stay on your credit report for two years, so you won’t see any difference in how many points they have affected your score until the second year after the original application date. The good news is that hard credit checks can have a lasting effect of up to 11 months or 16 months if related to a car loan, mortgage, or student loan.

Credit Inquiry After Preapproval

If you are preapproved for a loan, it doesn’t count as an inquiry because the lender does not require your credit report yet. However, if there were no agreement or offer of financing involved in that application, it would be considered a hard check and affect your score.

The Oasis Firm is here to help you with your credit repair needs! We understand how confusing the process can be, and we will make sure that you know exactly what is going on throughout it all.

Book an appointment with us today.

 

 

References:

https://www.experian.com/blogs/ask-experian/what-is-a-hard-inquiry

https://www.experian.com/blogs/ask-experian/what-is-a-soft-inquiry/

https://www.fico.com/en/products/fico-score

https://www.creditinfo.gov.ph/get-your-credit-report

https://www.consumer.ftc.gov/articles/0245-using-your-home-collateral

https://studentaid.gov/understand-aid/types/loans

FREE Consultation!

Don’t Let Your TAX BURDENS Hold Back Your Financial Dreams.