What Inquiries Affect Credit Scores?

Companies use your TransUnion, Equifax and Experian credit reports and your credit score to make decisions about granting credit or letting you buy an insurance policy. You give them permission to check your records and pull your score and this activity is recorded so other firms know who has been looking at your credit bureau files. Your credit score also reflects the inquiry process.

Hard Inquiries

Hard inquiries are credit report views conducted by companies in response to credit or insurance applications, according to the Lendingtree website. These inquiries affect your credit score because they represent a financial activity initiated by you. Your score is based on information compiled by the TransUnion, Equifax and Experian credit bureaus, which includes activity on current accounts and applications for new credit. Inquiries are added to your files regardless of whether your new account or insurance policy is approved or denied, and their credit score effect is the same either way.

Effects

Your credit score dips five points or less for a single hard inquiry, according to the MyFICO scoring website, but multiple credit checks have a cumulative negative effect. The score drops significantly if you have six more inquiries close together because you face an eight-times-greater risk of filing for bankruptcy with that many applications on your records. Hard inquiries lose their effect in about two years, when they get automatically purged from your credit reports. A cluster of inquiries for the same loan type, made within a single month, only affect your score like a single inquiry because scorers take rate shopping into account.

Warning

Occasionally you might not recognize a hard inquiry on your credit reports, which could be a sign of fraud. You may also not remember giving a particular company authorization to review your credit bureau records. Review your reports yearly via AnnualCreditReport.com, which is a free website mandated by the Fair Credit Reporting Act, and write to any firms you do not recognize asking them for proof that you have permission for the inquiry. They must comply with your request or eliminate the credit check from your records, according to the Illinois Attorney General's Office. Contact one of the credit bureaus if you believe the inquiry was made by an identity thief. The selected bureau will put a 90-day fraud alert in your records and notify the other two to do the same, the Privacy Rights Clearinghouse explains.

Considerations

You generate a soft inquiry if you review your own credit reports, according to Lendingtree, and this inquiry type also results from your current creditors checking your records and marketers buying pre-screened information about you. You see these inquiries on your credit reports, but they are invisible to companies evaluating you for credit or insurance policies, and they are disregarded by credit scoring formulas.