Credit Inquiries: What to Know
If you have ever applied for a credit card, loan, or mortgage, you are likely familiar with credit inquiries, or someone “running your credit”. While you might understand the outcome of the inquiry and the meaning of your overall score, you may not be aware of the different types of inquiries, as well as what’s included on your credit report.
So, what’s on my credit report?
Your credit report includes all current and past credit accounts you hold or have held. This also details your payment history, along with any late payments that are made 30, 60, and 90 days past their due dates. Additionally, your current account balances and credit limits will be included in the inquiry.
What’s a Credit Inquiry?
Put simply, a credit inquiry is any time you or a 3rd party look at your credit report. Depending on the type of inquiry that is made, your overall score could be affected. For this reason, it is important to know what makes the two types of inquiries different, and more importantly, how they can affect your credit score. Let’s break it down below!
The most frequent and least consequential. The most common example; If you have ever received a prequalification letter from a credit card, then you have had a soft inquiry run on your credit report. This type of inquiry does not require written consent, unlike hard inquiries, and has no impact on your credit score. Although your score will not be affected, remember that these inquiries will still appear on your report.
Hard inquiries are typically less frequent as they occur when you apply for a loan, credit card, or mortgage and you’ve provided written consent to a creditor to check your scores.
What do hard inquiries on your report say to lenders?
Many consecutive hard inquiries for credit cards can negatively impact your score and potentially give lenders that impression that you’re facing financial challenges. If you have multiple hard inquiries in a row from auto, mortgage or student loan lenders are less likely to have a negative impact, as reporting agencies may assume you are “rate shopping” and the multiple inquiries are viewed as a single inquiry.
Hard inquiries will stop impacting your score in about a year, but like soft inquiries, will stay on your report. While both types of inquiries play a part in the assessment of your overall credit, they only account for ~10% of your score.