How do credit inquiries affect my credit score?
What is a credit inquiry?
A credit inquiry is created when you apply for credit and a dealer or lender requests a copy of your credit report from a credit bureau. There are two different types of credit inquiries: hard inquiries and soft inquiries1.
Hard inquiries vs soft inquiries
Hard inquiries are the type of credit inquiries which are made on your behalf by a car dealership, or other lender, when you apply for credit. Soft inquiries are made when you request a copy of your own credit score, or a third party requires data about you unrelated to seeking credit. For example, a bank asking for your details to send you an offer of credit in the mail, or other direct marketing purposes.
How an inquiry affects your credit score
Depending on each person's credit history (how they manage credit over time) hard inquiries may or may not affect a person's credit score. Any application for credit will be considered and contribute toward your credit score for 12 months. They will remain visible, with no impact on your credit score, for 24 months2. In addition, they will not be visible for the first 30 days. For example, if you were shopping around for the best deal on an auto loan; your credit score wouldn't be affected by these inquiries if they were all within the same 30-day period3. In fact, if it’s for the same type of credit, it would be counted as one inquiry.
How much do inquiries contribute toward my credit score?
Even though hard credit inquiries are recorded on your credit report, they are a very small part of your overall credit score. How much an inquiry will contribute to your credit score is dependent upon the overall health of your credit. If you have a relatively short credit history, and have been applying for different lines of credit over a short period of time, a substantial amount of hard credit inquiries may lower your score.
Inquiries on the whole do not have a large impact on a credit score in comparison to the other factors assessing the risk of lending, and they are considered within the bigger picture of your overall credit score.
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