Why Hard Pull Credit Score Hurts Score

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Why Hard Pull Credit Score Hurts Score

Your credit score is an essential number that lenders use to evaluate your creditworthiness. It plays a crucial role in determining whether you can secure loans, mortgages, or credit cards, and at what interest rate. While you may be aware that certain factors, such as missed payments or high credit utilization, negatively impact your credit score, you may not be aware that hard inquiries can also hurt your score. In this article, we will explore why hard pulls hurt your credit score and answer some frequently asked questions about this topic.

What is a hard pull?

A hard pull, also known as a hard inquiry, occurs when a lender or credit card issuer checks your credit report to make a lending decision. This typically happens when you apply for a loan, mortgage, or credit card. Unlike soft pulls, which do not affect your credit score, hard pulls can impact your credit rating.

Why do hard pulls hurt your credit score?

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When a lender makes a hard inquiry into your credit report, it indicates that you are actively seeking credit. This can be seen as a risk factor to other lenders, as it suggests that you may be taking on more debt. Consequently, hard inquiries tend to lower your credit score, albeit temporarily.

How much does a hard pull affect your credit score?

The impact of a hard pull on your credit score is relatively small, typically ranging from 5 to 10 points. However, if you have multiple hard inquiries within a short period, the cumulative effect can be more significant and may suggest higher credit risk to lenders.

How long do hard inquiries stay on your credit report?

Hard inquiries stay on your credit report for two years. However, their impact on your credit score diminishes over time. After about six months, the negative effect of a hard inquiry becomes less significant, and after one year, it no longer impacts your credit score.

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Do all hard pulls affect your credit score?

No, not all hard pulls affect your credit score. When you check your own credit report or score, it is considered a soft inquiry and does not impact your credit rating. Additionally, when lenders perform promotional inquiries to pre-screen you for credit offers, they are also considered soft inquiries and do not affect your score.

How can you minimize the impact of hard pulls on your credit score?

While you may not be able to avoid hard inquiries altogether, you can minimize their impact on your credit score. One way to do this is by rate shopping within a specific timeframe, typically 14 to 45 days, depending on the scoring model. During this time, multiple hard inquiries for the same type of loan or credit card are treated as a single inquiry, as it is assumed you are comparing rates and terms.

Is there a limit to how many hard inquiries you can have?

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There is technically no limit to the number of hard inquiries you can have, but having too many within a short period can raise concerns for lenders. Excessive hard inquiries can suggest that you are desperate for credit or may be taking on more debt than you can handle. It is generally advisable to limit hard inquiries and only apply for credit when necessary.

In conclusion, hard pulls can have a temporary negative impact on your credit score. While the effect is relatively small, multiple hard inquiries can compound the damage. Therefore, it is important to be mindful of how often you apply for credit and to only do so when necessary. By understanding the impact of hard pulls on your credit score and taking steps to minimize their frequency, you can maintain a healthy credit rating and increase your chances of securing favorable lending terms in the future.
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