In some cases, the mere act of having a creditor check your credit score can result in your score dropping a few points. This is because the credit reporting bureaus responsible for maintaining credit reports will interpret this inquiry as a sign that you are considering taking out another loan, suggesting you may be less creditworthy. However, only certain types of inquiries hurt your score.
Credit Report
Whenever a creditor inquiries about your credit history to a credit reporting bureau, this inquiry is listed on your credit report. It is the information contained on this credit report that is used by credit reporting bureaus to fashion your credit score. However, only inquiries made by creditors in response to a request by the individual for information about a new loan will count against your score.
Soft Inquiries
Inquiries made by parties that were not done at your request are known as soft inquiries. Soft inquiries can be made by a number of different kinds of people, including landlords, employers and finance companies trolling for new clients. None of the inquiries were done at your request because you were considering taking out new credit. Therefore, although they are listed on your credit report, these inquiries won't hurt your score.
Hard Inquiries
An inquiry made by a lender or creditor from whom an individual is considering taking out a loan is called a hard inquiry. A hard inquiry will count against your credit score, although it generally will only shave off a few points. This is because credit reporting bureaus believe that if a person is considering taking out a new loan, he may have a slightly lower chance of paying off his current loans.
Considerations
A borrower seeking a new loan on a home or car may worry that each of the inquiries by the finance companies to which he turned in applications will count against him. In fact, credit reporting bureaus do not count similar inquiries--such as multiple inquiries for a car loan--made within a short period of time against the individual multiple times. A group of these inquiries will result in a single, small reduction in score equivalent to if the individual has applied to only one company.
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