What Is a Hard Hit in Your Credit Score?

Your FICO credit score is a number from 300 to 850. Higher credit scores can qualify you for great rates on loans and credit cards. To maintain the best score, it's prudent to understand what a hard inquiry is and how it impacts your FICO credit score.

Identification

When you apply for credit, the lender will view your credit report. That places an inquiry on your credit report. This inquiry is considered a hard inquiry since it was done as a result of your applying for credit. Each time you apply for credit, a hard inquiry is placed on the report. This is different from a soft inquiry, such as when you check your own credit. Soft inquiries do not impact your credit score.

Significance

One hard inquiry may drop your score but it won't fall by much, according to MyFICO; however, several hard inquiries from different creditors within a short time may lower your credit score because FICO considers it risky behavior to apply for a lot of credit all at once. If you're comparing interest rates, as is the case when applying for a mortgage or auto loan, the FICO system considers that rate-shopping and the multiple inquiries will not count against you as long as they're done in close proximity to one another.

Consideration

When a lender or credit issuer views your report and leaves an inquiry, it remains on your credit report for two years, although it only impacts your FICO credit score during the first year, according to MyFICO. However, whenever you apply for credit within those two years, the lender or credit issuer can see the hard inquiries on your report. The inquiries reveal to which creditors you have recently applied -- and for which credit products.

Warning

The Fair Credit Reporting Act limits who can see your credit report to those that have a permissible purpose, or valid reason, to do so. This applies to lenders when you apply for credit. There is an exception, however. The law allows credit issuers and insurers that you have not applied with to view your credit file for the purpose of extending to you firm offers of credit. These are soft inquiries but if you would rather not allow this type of access to your credit report, you can opt out at the OptOutPrescreen website, which allows you to opt out for five years or permanently.