Credit Inquiries and How They Affect You

Is somebody about to pull up an inquiry regarding your credit? It’s only natural to be curious about what this means for your credit score and overall financial health. The fact is that our credit scores are looked at by lenders whenever we apply for credit cards, car loans, mortgages or personal loans. It’s also possible for landlords to look at our credit histories as part of any background checks that are conducted.

There’s no need to be scared if somebody is going to perform a credit inquiry on you. However, it is good to know what will happen and what you can expect in the aftermath. The first thing to know is that a hard credit inquiry will only happen if you are applying for credit or financing of some kind. All of the pre-approval checks that credit card companies and other lenders do are actually categorized as soft inquiries. A soft inquiry can also take place if an employer looks into your credit report. Soft inquiries won’t impact your credit score at all. However, hard inquires can if too many are done at around the same time.

The Hard Facts About Hard Credit Inquiries

It’s time to clear up the confusion about what will happen when a hard inquiry is done. Hard pulls typically take place when a lender, credit card company or some other financial institution that you’re working with checks your credit as part of the process of making a lending decision. Applying for student loans, personal loans or apartment rentals can also mean that hard inquiries will be performed. Here are the facts:

  • A hard inquiry will probably lower your credit score by a few points.
  • The impact usually diminishes or totally disappears pretty quickly.
  • The impact and duration of a ding will both be greater if multiple institutions perform inquires at about the same time.

The good news is that you can be smart when it comes managing hard inquiries. Try to avoid applying for a bunch of credit cards during a short period of time. Lenders and credit card companies could see you as a potentially risky borrower if several inquiries have been done over the course of a few months. That means that you could be denied access to some credit cards. What’s more, your credit history could hurt you if you suddenly need to apply for a car loan or if a dream house you’ve been eyeing suddenly goes on the market in your price range.

How to Be Smart Regarding Credit Inquiries

The only way to really keep your credit score in top shape is to avoid unnecessary hard inquires as much as possible. That means that you should only apply for financing of any kind if you’re really serious about making a purchase. What’s more, you should research lenders ahead of time to ensure that you’re only submitting applications to a carefully chosen handful of institutions that you really trust. It can also be helpful to estimate your chances of securing financing before you submit any applications. You can do this by taking a look at your own credit report before making any moves. The good news that goes with that piece of advice is that all three major credit reporting agencies will supply you with copies of your own credit report for free. You can review your own report without worrying about getting any dings.

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