How Credit Inquiries Lower Your Score

Making credit inquiries may affect your score depending on the type of inquiry you have made. Equifax and TransUnion are credit bureaus that keep track of your credit inquiries to determine whether or not you pose a risk to lenders. Learn what a credit inquiry is, how and for how long inquiries affect your score.

What is a credit inquiry?

Every time you or a lender/ bank check your credit score, it is referred to as a credit inquiry. It is simply a request for your credit information by a bank, a lender, or even by you. Two types of credit inquiries affect your credit score differently; a soft inquiry and a hard inquiry.

Soft inquiry

A soft inquiry happens every time you check your credit report. That also happens when you get a free credit score update or when a company requests your credit report for pre-approval offers for credit cards and other financial products.  Soft inquiries do not lower your score. They have no impact on your score whatsoever. For instance, CreditGurus pre-qualification does not affect your score. You are the only one who can see soft inquiries. Other people who may check your credit reports will not see this type of inquiry. Hard inquiries, on the other hand, are visible to everybody.

Hard inquiry

 A hard inquiry is what lowers your credit score and does so drastically. A hard inquiry happens when a lender checks your credit report because of an application for a good or service. It simply indicates that you are applying for new debt. Hard inquiries usually raise red flags in your credit report, mainly because everyone can see them. A few examples of hard inquiries:

  • Personal loan
  • Mortgage
  • Credit card
  • Credit line increase request etc

How hard inquiries lower your score

Hard inquiries are bad for your credit report because the lender might think you are not credible and may not trust you with their money. A hard inquiry would reduce your credit score. Although the exact number of points may vary depending on certain factors, it usually drops about 10 points or less. The decrease in your score is primarily affected by your credit history. If you have a track record of paying off debts in time and have no other credit issues, a hard inquiry will not have as much of an effect on your credit.

How long do hard inquiries affect your score?

How long a hard inquiry affects also depends on your credit history. The drop in your score is temporary and only lasts a few months. If everything in your credit reports remains positive, your score may be back up sooner than expected.

As mentioned above, CreditGurus pre-qualification does not affect your score. So you can rest easy knowing that your credit score is at no risk of being lowered. To keep your credit score favourable, ensure that your credit history is vital. That means that you should make your payments on time and keep your credit card balances low.

By Fred G on 04 October, 2021

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