“Serious inquiries only” is a phrase you probably associate with Craigslist postings for apartments or puppies, not something that comes to mind when you’re thinking about your credit score. But it should. Every time someone asks to see your credit report an “inquiry” is noted, and these inquiries impact your score. Which matter, which don’t, and how does it all work? We’ll explain below.
Any time someone pulls your report or asks to see what your score is, that’s a credit inquiry, and there are two categories – hard and soft. Soft inquiries are like sweet and snuggly little kittens – harmless. Hard inquiries are more like the surly feral cats that live outside behind the dumpster. They’re problematic, especially if there are too many of them.
Soft Inquiry Examples
- When you ask to see your own credit report (this can even be viewed in a positive light, as it’s seen as an indicator of personal responsibility)
- When a potential employer asks to see your report
- When existing lenders pull your score as part of routine management
- When a bank or business pre-qualifies you for a credit card or loan
- When an insurance company wants to see your score
Soft inquiries don’t factor into your score at all and aren’t even noted on your credit report. They’re your little secrets.
Hard Inquiry Examples
- When a business pulls your score because you’ve applied for a credit card
- When your score is pulled because you’ve applied for a loan
- When your score is pulled because you’ve applied for a mortgage
Hard inquiries are always noted on your report and are factored into your score, and you want to keep these to a minimum because too many of them can have a dismal effect on your credit rating. Barry Paperno, consumer operations manager for MyFico.com, explains: “An inquiry from a lender typically means a consumer is taking on additional debt, which can lead to additional credit risk in the eyes of a lender and a slightly lower FICO score for the consumer.”
A hard inquiry or two isn’t likely to totally decimate your score if you already have good credit. But they can definitely add up, so it’s crucial to pay attention to what you’re doing and when you’re doing it.
The good news is that if you apply with a bunch of different lenders within a short period of time (generally within 14 days – maybe you’re shopping around for the best mortgage rate), that’s taken into consideration and won’t be factored negatively into your score. The bad news is that this isn’t the case for credit cards. Your score is impacted every single time you apply for a new card. So next time you’re in Macy’s and you’re tempted by the cashier’s offer to receive 10% off your purchase if you apply for a Macy’s card, just say “No!” Five bucks off your new shoes just isn’t worth the impact on your credit score.
The idea of keeping your credit score in check can seem daunting to the average person, but it’s not that involved. Just keep these tips in mind: be serious about your credit inquires, use common sense and remember that you have great resources available to you. We’re here to help you help yourself.