Do you panic whenever a lender or landlord proposes pulling your credit report? If so, a lot of that anxiety may be overblown. Too many credit inquiries in a short enough period of time will make a dent in your credit score, but this shouldn't deter you from rate shopping for the best offers.
The answer differs from lender to lender, but most consider six total inquiries on a report at one time to be too many to gain approval for an additional credit card or loan. In this article, we will review: What a hard credit inquiry is. What the difference is between hard and soft inquiries.
A hard inquiry can actually ding your credit score a few points, regardless of if you end up being approved or denied for a credit card, personal loan or mortgage. With mortgages specifically, you'll likely be applying for a home loan from multiple lenders so you can compare your offers.
The short answer is yes, but it depends on things like how many inquiries a credit bureau receives for you in a short period of time, and the type of inquiry.
No. Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry. This is because other lenders realize that you are only going to buy one home. You can shop around and get multiple preapprovals and official Loan Estimates.
Whether you're buying a new home or refinancing an existing mortgage, it pays to shop around. Fortunately, the credit bureaus won't “ding” you for having multiple inquiries due to rate shopping.
However, multiple hard inquiries can deplete your score by as much as 10 points each time they happen. People with six or more recent hard inquiries are eight times as likely to file for bankruptcy than those with none. That's way more inquiries than most of us need to find a good deal on a car loan or credit card.
If you find an unauthorized or inaccurate hard inquiry, you can file a dispute letter and request that the bureau remove it from your report. The consumer credit bureaus must investigate dispute requests unless they determine your dispute is frivolous.
According to FICO, studies show that people with six or more hard inquiries on their credit reports can be up to eight times as likely to declare bankruptcy, compared to those with no inquiries.
If you have a healthy credit history and credit score to begin with, it's likely that any hard inquiry on your credit report would do very little damage to your score, or even none at all. Hard inquiries tend to have a greater impact on the credit scores of people with a short credit history or few credit accounts.
Here's why comparing rates can lower your credit score: Each time you apply for a home loan, a mortgage lender does an in-depth review of your credit report. This action is referred to as a hard inquiry, and it can impact your score. Read: Best FHA Loans.
There are many factors that lenders consider when looking at your credit history, and each one is different. The typical timeframe is the last six years.
Getting preapproved for a mortgage usually means undergoing a hard credit pull, which causes a dip in your credit score. While soft credit check mortgage preapprovals are hard to come by, a prequalification can help you explore loan options without the credit score hit.
Lots of recent hard inquiries on your credit report, however, could elevate the level of risk you pose as a borrower and have a more noticeable impact on credit scores. Hard inquiries can stay on your credit report for two years, but the degree to which they affect your credit diminishes over time.
In general, six or more hard inquiries are often seen as too many. Based on the data, this number corresponds to being eight times more likely than average to declare bankruptcy. This heightened credit risk can damage a person's credit options and lower one's credit score.
Hard inquiries are taken off your credit reports after two years. But your credit scores may only be affected for a year, and sometimes it might only be for a few months. Lenders may be concerned if you have too many hard inquiries on your credit report within a short period of time.
Too many credit inquiries on your credit report can make you appear riskier to lenders which can reduce your chances of getting approved for new credit. While different lenders may have varying criteria for what they deem as “too many,” you should try to keep the number of inquiries under six.
Disputing hard inquiries on your credit report involves working with the credit reporting agencies and possibly the creditor that made the inquiry. Hard inquiries can't be removed, however, unless they're the result of identity theft. Otherwise, they'll have to fall off naturally, which happens after two years.
In most cases, hard inquiries have very little if any impact on your credit scores—and they have no effect after one year from the date the inquiry was made. So when a hard inquiry is removed from your credit reports, your scores may not improve much—or see any movement at all.
Credit repair companies can't remove legitimate hard inquiries from your credit report, and neither can anyone else. And there's really no need to pay a credit repair company to get an inaccurate inquiry removed, since you can do that yourself for free.
Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.
Bottom line. Generally, it's a good idea to wait about six months between credit card applications. Since applying for a new credit card will result in a slight reduction to your credit score, multiple inquiries could lead to a significantly decrease.
How do hard inquiries impact your credit score? A hard credit inquiry could lower your credit score by as much as 10 points, though in many cases the damage probably won't be that significant. As FICO explains: “For most people, one additional credit inquiry will take less than five points off their FICO Scores.”