A credit inquiry means that a creditor, like a bank or a credit card company verifies your credit, by looking at your credit report and makes an “inquiry” of sorts.
There are two types of credit inquiries which are known as hard pulls and soft pulls.
What are soft pull credit inquiries?
Soft pulls do not impact your score at all and are usually done without your express consent. This basically translates into regular credit checks done by companies for lawful purposes. Some examples of soft pull credit inquiries:
- Credit card company looking at your credit to send you a pre-approved offer
- Background check done by an employer
- Identity verification while opening a bank account
- Regular checks done by your existing credit card company and bank to monitor unusual credit activity
- You yourself requesting your credit report
Soft pull credit inquiries can’t be seen by other creditors on your credit report, but are visible to you. They do not impact your score in any way at all.
What are hard pull credit inquiries?
The credit inquiries to watch out for are known as hard pull credit inquiries. These inquiries take place when you give someone permission to view your score and they lower your score 5 to 6 points with every inquiry. (This is just an approximation)
So basically when you apply for that store credit card with zero annual fee and a low APR, you need to give them permission to verify your credit by making a credit inquiry to verify whether you are eligible or not.
Hard pull inquiries are also known as voluntary inquiries as they involve you volunteering your credit information to a credit card company, landlord, phone, cable, internet company etc.
The credit inquiry will be visible on your report for at least an year (usually two) and will impact your score by bringing it down by 5 to 6 points for a six month to one year period (this is just an approximation).
What is the rationale for this?
The thinking behind lowering your score because of a credit inquiry is that potential creditors view such credit inquiries in a slightly negative light. As a large number of these show a tendency towards taking a lot of credit and potentially overspending and going beyond your means.
What does it mean for you?
A lot of people apply for a credit card to get a $30 cash back or even a free game CD. This looks like a bargain because the rates are low and you seem to be getting something for nothing!
However now you know that is not the case and you will get your score lowered every time you apply for a new store card or something else. While one of these will not make a difference, have five or six on your report in a short time and then you will start noticing the difference in lender’s attitudes.
So don’t apply for every credit card that will give you ten bucks off on a DVD and be a little more restrained while applying for any new credit. In addition to that, stay safe byÂ monitoring allÂ 3 credit reports at a low monthly rate.
11 thoughts on “How does a credit inquiry affect my credit score?”
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I have taken a education loan. It was not paid on time. And also final close after 3 years it show as DBT, in cibil report. I have noc.
Bit how can I improve this factor from my report.
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I had applied for Deutsche Bank credit card in Jan, 2007, for which 4 enquiries were made with CIBIL, which I came to know only after receiving my CIR report from CIBIL. Now the credit card business of DB has been taken over by Indusind Bank, I have sent innumerous mails to them but I have not received any reply. Can I approach to Banking Ombudsman for the same?