An automatic credit inquiry is a request for information about your current financial situation that you receive when you make a loan application. This type of inquiry can be made by lenders, creditors, or anyone else who wants to verify your identification before granting you access to money.
What are Credit Inquiries?
Credit inquiries are usually initiated at the beginning of the lending process, but they do not necessarily cease once you have been approved for funding. Suppose you decide not to take out the loan after the entire process. In that case, lenders will still report your application to credit bureaus, regardless of whether you were ultimately accepted for funding.
This guide dives into what a hard credit inquiry is, how it’s different from a soft credit inquiry and the potential impact it has on your credit report.
Credit Inquiries: Hard Credit Inquiry
Have you recently reviewed your credit report and noticed a series of hard inquiries? Or maybe you’ve heard the term used before and aren’t sure what it means or how hard inquiries differ from soft inquiries.
Also known as a hard pull, a hard credit inquiry is generated each time you apply for a debt product. This could include an installment loan, credit card or line of credit. Some landlords, service providers and utility companies also run credit checks on applicants or new customers seeking services.
How a Hard Credit Inquiry Affects Your Credit Report
Hard credit inquiries can cause a dip in your credit score – typically between two and five points. However, it’s usually temporary, and your score could start to rebound after just a few months.
Keep in mind that too many hard credit inquiries in a short period can signal financial problems to potential lenders and creditors. They may get the sense that you’re running low on funds and are resorting to debt products to find financial relief, which could also result in the inability to pay back what’s borrowed.
You should also be aware of rate shopping, a provision of the FICO credit-scoring system that allows you to shop around for an auto loan or mortgage without taking a significant hit to your credit score. Instead, multiple hard credit inquiries are grouped together as one as long as they’re generated within a 14- to 45-day window.
How Long Does a Hard Credit Inquiry Stay on Your Credit Report?
Hard credit inquiries linger on your report for up to two years. After that, it’ll be visible to creditors, lenders and anyone else who checks your credit report.
Common Examples of Hard Credit Inquiries
Below are some common scenarios that result in hard credit inquiries:
- You apply for a credit card, personal loan, student loan, auto loan, home equity loan or another type of installment loan.
- You apply for a personal line of credit or home equity line of credit (HELOC).
- You apply for an apartment or home.
- You apply for cell phone service with a wireless provider.
- You apply for a rental home, apartment or mortgage to purchase a home.
- You apply to have utilities (i.e., electricity, water, gas) connected in your new home.
How Does a Hard Credit Inquiry Differ from a Soft Credit Inquiry?
Soft credit inquiries are generated when you check your own credit report and score. They also occur when a creditor or lender accesses your credit file and uses it to pre-qualify you for a credit card or loan. Unlike hard credit inquiries, soft credit inquiries do not impact your credit score.
Get Auto Refinance Loan Offers Without a Hard Credit Inquiry
Maybe you’re considering an auto loan refinance, but you worry that your credit score will take a hit from shopping around with multiple lenders. Although rate shopping will help protect your credit health, there are no guarantees that you’ll get approved. Furthermore, securing refinance offers without a hard credit pull is ideal and can save you a lot of time.
