Nidhi
Sameer Staff answered 4 months ago
Credit inquiries can affect your credit score differently depending on whether they are classified as hard inquiries or soft inquiries.
Hard Inquiries: These occur when a lender checks your credit report as part of the decision-making process for a credit application you’ve made. Examples include applying for a loan, credit card, or mortgage. Hard inquiries typically have a temporary negative impact on your credit score because they indicate that you’re actively seeking credit. Each hard inquiry can lower your score by a few points, but the effect is usually minor and short-lived. They remain on your credit report for about two years but generally only affect your score for the first 12 months.
Soft Inquiries: These occur when you or a third party checks your credit report for reasons unrelated to a credit application. Examples include checking your own credit report, pre-approved credit offers, or background checks by potential employers. Soft inquiries do not impact your credit score at all. They are only visible to you and do not affect your creditworthiness.
When shopping for loans or credit cards, multiple hard inquiries within a short period are usually treated as a single inquiry for scoring purposes. This recognizes that consumers may be rate shopping and looking for the best terms on a single loan or credit card. The exact timeframe varies but is typically around 14 to 45 days. During this period, multiple inquiries for the same type of credit are grouped together and counted as one inquiry, minimizing the impact on your credit score.
To minimize the impact of credit inquiries on your credit score:
Try to limit the number of hard inquiries by applying for credit only when necessary.
If you’re rate shopping for a loan or credit card, do so within a short timeframe to ensure multiple inquiries are treated as a single inquiry.
Monitor your credit report regularly to check for unauthorized inquiries and report them promptly if you find any.