Do All Credit Inquiries Damage Your Credit Scores?

Many people are afraid to pull their own credit reports because they have been trained that every time you do so it costs you points in your credit score, but this is not exactly true.  You can pull your credit reports as often as you like and it will never impact your credit scores, as long as you are using a site or process that is for a personal credit pull, also called a consumer disclosure.  Let’s go through this in a semi-organized manner…

What is a Credit Inquiry?  An inquiry is a record of someone gaining access to your credit reports.  The inquiry has two meaningful components, the date of the access and the name of the party doing the accessing.  The credit reporting agencies maintain a record of inquiries from anywhere between six months and 24 months, depending on the inquiry type.

What is a Soft Inquiry? A soft inquiry is any type of inquiry that doesn’t count in your credit scores and is not viewable by lenders.  Soft inquiries are posted when the following occur…

i.      You personally pulling your own credit

ii.     Employers pulling your credit

iii.    Insurance company pulling your credit

iv.     Pre-Approved credit offer

v.     Account Review or Account Maintenance – Someone you already have a relationship with is checking to see how you are paying your other bills

What is a Hard Inquiry?  A hard inquiry is any inquiry type that can count in your scores and is viewable by lenders.  Hard inquiries are posted when the following occur

i.     Mortgage applications

ii.     Auto Loan applications

iii.     Credit card applications

iv.     Line of credit applications –  unsecured credit

v.     Collection Agency – skip tracing

Hard inquiries are what we in the credit-scoring world refer to as “fair game,” meaning they are viewed and considered by credit scoring models, lenders and anyone else who has access to your credit reports.  These are the types of inquiries that CAN lower your scores.  Notice the obnoxious bolding of the word “CAN.”  Hard inquiries don’t always lower your scores but they certainly can.

Soft inquiries are off limits.  They’re off limits to credit scoring models and off limits to lenders.  In fact, they aren’t shown to anyone other than you when you ask for a copy of your own credit reports.  Most credit reports are polluted with soft inquiries so thankfully they have no impact on your scores at all.

One good thing to know about when applying for credit:  when you apply for a mortgage, auto loan or student loan you have a 45 day time period to shop around for the best interest rates–and the multiple inquiries will be counted as only 1 inquiry by the FICO scoring system.  If you want to be very technical about how these inquiries work, it goes like this:  you apply for a mortgage on June 1, for the first 30 days it is not calculated into the credit score at all, then on day 31 the score can be affected by the pull.

Remember that an inquiry, depending on the type, can be seen on your credit report for anywhere from 6 to 24 months, but it is only calculated in the score for 12 months.  There are definite advantages to checking your credit personally.  By checking your report on a regular basis you will be able to tell if something is going on with your credit report that you were not aware of.  The sooner you are aware of this, the more likely it is that you will be able to take care of it and have good results.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.

Categorised in: Credit Report, Credit Score, Getting Credit, Money & Identity

This post was written by John Ulzheimer