What Is A Credit Inquiry and How Does It Impact My Credit?
THERE ARE TWO TYPES OF INQUIRIES:
“Hard” Credit Inquiry
“Soft” Credit Inquiry
A hard credit inquiry happens when a lender pulls your credit report to evaluate your ability to qualify for a loan. This is common when applying for a mortgage, auto loan, credit card, or personal loan. These inquiries can have a negative impact on your credit score.
A soft credit inquiry happens when you pull a consumer credit report or a lender is trying to send you a pre-approved loan offer. These inquiries will not show up on your credit report and do not negatively impact your credit score. Examples of consumer credit reports are Credit Karma, Smart Credit, or any credit report pulled by a consumer to monitor their credit.
HOW DO HARD INQUIRIES IMPACT MY CREDIT SCORE?
FiCO says that 10% of your credit score is made up of “New Credit”. This means that 10% of your credit score is evaluated on the number of inquiries you have in a given amount of time (approximately 12 months). Aggressively applying for access to credit leads to multiple credit inquiries on your credit report. Having too many inquiries on your credit report can show you as an increased risk and can negatively impact your credit score.
OUR ADVICE?
Be cautious when getting your credit report pulled. If you are shopping for a mortgage and have limited inquiry activity, you are probably safe to shop an interest rate. However, aggressively having your credit report pulled could potentially lead to a negative impact on your credit score.
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