You know your credit score and you may need to apply for a new credit card, or loan, or a prospective employer may want to run a credit inquiry on you, but you are worried about your score dropping. After all, you’ve heard people tell you your score will drop on each credit inquiry. You may be asking yourself how many points does your credit score go down for each inquiry? Is it worth running an inquiry?
With that said, this article will dive into how many points you may lose for running an inquiry and explain soft verse hard inquiries, credit scores, and everything you need to know about credit. In this ever-changing world, being financially literate is a must. Simple knowledge such as this can help you make wiser and more cost-efficient decisions. Read on for more information.
Depending on what kind of credit inquiry you’re going to make, the points of your credit score vary. For a deeper understanding of that topic, there a generally two types of credit inquiries: hard inquiries and soft inquiries. Simply put, making a soft inquiry won’t affect your credit score at all while hard inquiries can make your credit score go down depending on your action.
With all that said, how many points does your credit score go down for an inquiry?
As already mentioned earlier, soft inquiries won’t affect your credit score, but a hard inquiry can make your credit score go down by as much as 10 points. However, a hard inquiry doesn’t always equate to 10 points; there are times when it will only go down by 5 which is most common.
It also depends on how responsible you have been with your credit score up to this point. If you have a low score which is an indicator of multiple loans or high debt on the loans another inquiry may drop your score more than someone with a great score putting in an inquiry to which they may only lose 1 or 2 points.
It is important to remember a credit score drop from a hard inquiry is temporary and usually will bounce back within a few months assuming everything else stays the same.
Typically not, credit agencies will usually treat multiple credit inquiries within a 14 to 45-day range as one inquiry depending on the agency. It is best therefore to try to get all hard inquiries done within a 14-day period. That way you won’t be penalized for each inquiry when you are shopping for the best loan provider.
As the name already suggests, a credit inquiry is a process of checking the state of your credit score. Making a credit inquiry is important before making a decision so that you can gauge your capacity to handle an additional financial responsibility on your shoulders.
Moreover, a credit inquiry isn’t just for you. Before making transactions, landlords, lending companies, and authorities can ask for your credit history and file to help them have a glimpse of how you spend your credit and whether you are taking responsibility for it.
Related: Get Out of Debt: Easy Tips
Also called soft pulls, soft credit inquiries pertain to actions that are unrelated to a new credit of financial responsibility. For example, a lender or credit company simply wants to check your records as a form of a background check. Soft pulls are also done during assessment and evaluation on whether or not you can be endorsed for a new credit offer.
If you’re unaware of this yet, this can be done with or without your knowledge, while there are times when your permission is needed too. To emphasize it again, soft inquiries indicate that you aren’t going to make an additional financial commitment; it is simply for knowing and determining.
Here are some examples of soft inquiries.
Also called hard pulls, hard inquiries pertain to the process of inquiring before you commit to a new line of credit or get into another financial commitment. For example, before applying for another credit card, the company or issuer will check your credit history and file. This is a hard inquiry, which also means that you have to give your permission unlike making a soft inquiry which can be done without your knowledge.
Here are some examples of commitments that require hard inquiries.
The life you live every day today is much different than how life was before. From your daily routines, tasks, transportation, and even things that are related to gadgets and technology, everything has changed and continues to evolve. Speaking of routines, one of the things that everyone does is buy and shop for their basic necessities and wants. To make this possible, you have to have money, right?
Right, but not quite. In today’s day and age, there are things such as credit and loans. If you don’t know about it yet, we can put it this way. During times when you need something but you don’t have enough money yet, a loan or a credit helps you pay for it at the moment. In return, you have to pay back the balance plus interest every month, depending on what is agreed upon.
Related: Which Credit Report is the Best?
Now that you’ve been introduced to loans and credits, it’s time to walk you through what a credit score is. It is important to understand how credit scores work and function so that you can decide wisely and make cost-efficient decisions in the future. In a nutshell, a credit score pertains to a number that describes your creditworthiness. Sure, anyone can use credit, but not everyone is worthy to use it anytime they want and for any amount of money they want.
Just like the saying goes, with great power comes great responsibility, the same can be said when it comes to consumers. To prove that you are responsible and credible enough to settle the fees and your balance, your credit score should show a high number. This usually ranges from 300-850, with 300 leaving the worst impression and 850 reflecting an excellent credit score, proving that you are a responsible payer.
With that being said, you’re probably wondering where your credit score is based on. In the next part of the article, that’s what we’re going to discuss.
In evaluating and giving your credit score, they don’t judge based on what you tell them. Your credit score is based on a lot of factors such as your bank accounts, credit history, number and amount of debts (paid and unpaid), payment history, and even your maxed-out or high-balanced credit cards. During times when you want to check up on your credit or credit score, the best way to do that is by making a credit inquiry.
Now that you’ve learned a thing or two about credit, you can now make decisions based on knowledge and tips. If you’re wondering how to maintain your credit score every time you’re going to make an inquiry, there are two ways to do that. First, avoid making consecutive financial commitments. And second, try to put intervals between your credit score inquiry.