How Long Do Credit Inquiries Affect Credit Score?
Your credit score plays a vital role in your financial well-being. It influences your ability to secure loans, credit cards, and even impacts your insurance premiums and rental applications. One factor that affects your credit score is credit inquiries. In this article, we will explore how long credit inquiries affect your credit score and answer some frequently asked questions regarding this topic.
Credit inquiries are requests made by lenders or financial institutions to access your credit report and evaluate your creditworthiness. There are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries occur when you apply for credit, such as a mortgage, car loan, or credit card. Soft inquiries, on the other hand, are typically initiated by you or a company for non-lending purposes, such as checking your own credit report or when a potential employer performs a background check.
The impact of credit inquiries on your credit score varies depending on the type of inquiry and the credit scoring model used. Generally, hard inquiries have a more significant effect on your credit score compared to soft inquiries. Hard inquiries can typically lower your credit score by a few points, while soft inquiries have no impact.
So, how long do credit inquiries affect your credit score? The good news is that the negative impact of hard inquiries is temporary and typically lasts for about two years. However, the effect decreases over time, and after six months, the impact is minimal. This means that a hard inquiry will have less impact on your credit score after six months and will no longer be visible after two years.
Now, let’s address some frequently asked questions regarding credit inquiries and their impact on credit scores:
1. How many points does a hard inquiry affect your credit score?
A hard inquiry can typically lower your credit score by around 5-10 points. However, the exact impact may vary based on various factors, including your overall credit history and the credit scoring model used.
2. Will multiple hard inquiries significantly lower my credit score?
Having multiple hard inquiries within a short period can have a more significant impact on your credit score. Lenders may view multiple inquiries as a sign of financial instability or excessive credit-seeking behavior. However, credit scoring models typically take into account that consumers may shop around for the best loan terms. Therefore, inquiries made within a specific timeframe for a mortgage, auto loan, or student loan are usually counted as a single inquiry.
3. Do credit inquiries affect everyone’s credit score?
No, credit inquiries only affect individuals who have credit files. If you have no credit history or have never applied for credit, inquiries will not impact your credit score.
4. Do soft inquiries affect your credit score?
No, soft inquiries do not impact your credit score. Checking your own credit report, pre-approved credit offers, and background checks by potential employers are examples of soft inquiries.
5. Can you remove hard inquiries from your credit report?
While it is difficult to remove legitimate hard inquiries from your credit report, you can dispute inaccurate or unauthorized inquiries. If you believe an inquiry was made without your permission or is incorrect, you can contact the credit reporting agency to initiate a dispute process.
6. Do credit inquiries affect all credit scores the same way?
Different credit scoring models may treat credit inquiries differently. For example, the FICO score, the most commonly used credit scoring model, groups multiple inquiries made within a specific timeframe for a specific purpose as one inquiry. However, other models may treat each inquiry separately.
7. Can you avoid credit inquiries while shopping for the best loan terms?
Yes, you can minimize the impact of inquiries while shopping for the best loan terms. If you plan to apply for multiple loans, such as mortgages or auto loans, within a short period, try to do so within a 14- to 45-day window. Most credit scoring models consider multiple inquiries for the same purpose made within this timeframe as a single inquiry.
In conclusion, credit inquiries, especially hard inquiries, can have a temporary impact on your credit score. However, the effect diminishes over time, and after two years, the inquiry will no longer be visible on your credit report. Understanding how credit inquiries affect your credit score and following smart credit practices will help you maintain a healthy credit profile.