How Do Inquiries Affect Your Credit Score?

Hard Inquiries vs. Soft Inquiries

Inquiries affect your credit score only if they come in as a "hard inquiry." A "hard inquiry" is when a creditor pulls your credit report to verify credit information, often for loan approval, financing approval or credit card approval. A hard inquiry will show all information on your credit report to the creditor. A creditor must have your permission to do a hard inquiry. A "soft inquiry" is done for promotional purposes--usually by credit card companies wanting to verify identity to send you unsolicited applications, or insurance companies hoping to cold call you for business. This type of inquiry does not show all information on your credit report, only identification information. Your permission is not needed for this type of credit inquiry.

Credit Score Impact

Your credit score will be affected by hard inquiries, but many factors are considered. Multiple inquiries from the same type of creditor will not have negative affects if made within a short time frame, typically 14 days, depending on the type of credit being pursued. Mortgages can be shopped for within a 30-day period before having a negative affect on your credit score. The theory is that you shouldn't be punished for shopping around for the best interest rates available, but it is a "red flag" if it looks as though you are trying to obtain a large amount of credit in a short time.

Reducing Inquiries

Aside from not pursuing any new credit, the only way to reduce the number of existing inquiries is to wait the two years for them to fall off your credit report. Keep a watch on your credit by checking every month to see if the inquiries are falling off like they should be. You can simply pull your credit report from each bureau every month, or you can sign up for a monitoring alert program. There is typically a small fee associated with these services. This is a good practice if you are trying to build up your credit, and also to watch out for any fraudulent activity.