Mastering Credit Inquiries

A credit inquiry is an assessment of an individual’s creditworthiness and is typically conducted by a credit grantor, such as a bank, credit card company, or lender. The inquiry may be initiated by the credit grantor itself or by an authorized agent on behalf of the credit grantor.

The purpose of a credit inquiry is to help the credit grantor determine whether an individual is a good credit risk.

What Is a Credit Inquiry?

A credit inquiry is a request for your credit report. Inquiries are made when you apply for credit, and can also be made by employers, landlords, and businesses with which you have financial dealings. Inquiries remain on your credit report for two years but only impact your score for the first year. After that, they fall off your credit report entirely.

There are 2 different types: hard and soft.

What is a hard inquiry?

A hard inquiry is when a lender checks your credit report to decide whether or not to give you a loan. It will show up on your credit report and may lower your credit score.

List of Common hard inquiries:

– Applying for a credit card

– Applying for a personal loan

– Applying for a mortgage

– Applying for a car loan

What is a soft inquiry?

A soft inquiry is when someone checks your credit report for non-lending purposes, such as when you check your own credit report or when a potential employer checks your credit report. Soft inquiries don’t affect your credit score.

List of Common soft inquiries:

– Checking your own credit report

– When a business checks your credit report for non-lending purposes, such as when you’re applying for a job

– When you’re preapproved for credit card offers

– When your current creditors check your credit report to see if you’ve been paying your bills on time

How many hard inquiries are too many?

It depends. If you have a short credit history, one or two hard inquiries may not have much of an impact on your credit score. But if you have a long credit history with many hard inquiries, it could be seen as a red flag by lenders and lower your chances of getting approved for a loan.

Will checking my own credit scores result in a hard inquiry?

No. Checking your own credit score is a soft inquiry and won’t affect your credit score.

Example of a Credit Inquiry

Let’s say you apply for a credit card. The credit card issuer will check your credit report to see if you’re a good candidate for the card. This is a hard inquiry, and it will appear on your credit report.

Now let’s say you want to check your credit score to see where you stand. You pull your credit report and see that it’s been checked by a few credit card companies recently. These are soft inquiries, and they won’t impact your credit score.

Inquiries are just one factor that credit scoring models take into account when calculating your credit score. So if you have a few inquiries on your credit report, don’t worry too much – they won’t have a major impact on your credit score.

Bottom Line

A credit inquiry is a request for your credit report. There are two types of inquiries – hard and soft. Hard inquiries can impact your credit score, while soft inquiries won’t. Checking your own credit report is a soft inquiry.