When a Credit Search Hurts You

Your credit score – the numeric snapshot of your credit report – is influenced by five things: your payment history, debt level, credit age, type of credit accounts, and credit inquiries. This post focuses on that last factor: credit inquiries.

Credit inquiries are placed on your credit report each time a credit check is done on you. These credit checks are most often the result of an application you make when you're searching for new credit. Most obviously, credit checks are done when you apply for a credit card or loan. But there are other situations when businesses do credit checks, like when you apply for an apartment, utility services, or sometimes even a new job. (Check out our guide on Who Can Access Your Credit Report for more information).

Two types of credit checks

Credit checks fall into two categories: hard credit inquiries and soft credit inquiries. Hard inquiries are credit checks that are made when you apply for credit, like the examples listed above.

On the other hand, soft inquiries are the result of your own credit checks, credit checks from businesses you already have a relationship with, and credit checks from businesses offering pre-approved credit cards. These soft credit inquiries won’t hurt your credit score. However, hard inquiries do cause your credit score to drop.

Credit checks made while you search for new credit or loans

When you’re shopping around for a loan, you undoubtedly want to get the best rate. So, you’ll apply for loans through various lenders to see which rates you’ll be offered. Each time you put in a new application, a credit check is done. Fortunately, your credit score isn’t damaged by the credit checks done during rate shopping in the same way it would be if you were applying for several different credit cards.

As long as you’re shopping for a mortgage or auto loan, the credit scoring model ignores credit inquiries made within a certain window. This window ranges from 14 days to 45 days depending on the version of the credit score that’s being used. During that time, inquiries from mortgage and auto lenders don’t hurt your credit score. The fact that you’re rate shopping won’t hurt your credit score. (Other inquiries will continue to influence your credit score.) Even after that window has passed, all the inquiries made during your shopping period are treated as only a single inquiry on your credit report.

Reviewing credit inquiries

Credit inquiries resulting from a credit check stay on your credit report for two years and only influence your credit score for one year. You can review your credit inquiries by pulling your credit report. Make sure you authorized all of the credit inquiries listed on your report; unauthorized inquiries or inquiries you don't recognize could be a sign of identity fraud.