A hard credit pull typically lowers your credit score by a small amount, often fewer than five points. However, depending on various factors, it could potentially decrease your score by as much as 10 points.
Understanding Hard Credit Pulls
A hard credit pull, also known as a hard inquiry, occurs when a lender or financial institution checks your credit report to make a lending decision. This usually happens when you apply for new credit, such as:
- A credit card
- A mortgage loan
- An auto loan
- A personal loan
- Student loans
Lenders perform hard inquiries to assess your creditworthiness and determine the risk involved in lending you money.
How Many Points a Hard Pull Takes Off
The exact number of points a hard inquiry takes off is not fixed and varies by individual.
For most people, a single additional credit inquiry will result in a decrease of less than five points. In some situations, however, a hard credit inquiry could lower a score by as much as 10 points.
Here's a quick summary of the potential impact:
| Impact Category | Score Reduction Range |
|---|---|
| Typical Impact | Fewer than 5 points |
| Maximum Impact | Up to 10 points |
Factors Influencing the Impact
The actual impact of a hard inquiry on your credit score is influenced by several factors, including:
- Your Overall Credit Profile: Individuals with a strong, long credit history and high credit scores may experience a minimal drop, while those with a shorter history or lower scores might see a more noticeable effect.
- Number of Recent Inquiries: A single hard inquiry typically has a minor impact. However, multiple hard inquiries in a short period can signal to lenders that you are actively seeking a lot of new credit, which is often viewed as a higher risk.
- Credit Mix: Your existing mix of credit accounts (e.g., credit cards, installment loans) can also play a role.
- Type of Loan: For "rate shopping" activities like applying for a mortgage, auto loan, or student loan, multiple inquiries within a specific timeframe (usually 14 to 45 days, depending on the scoring model) are often treated as a single inquiry. This allows consumers to shop for the best rates without penalizing their score for each comparison.
Duration of Impact
A hard inquiry generally remains on your credit report for two years. However, its impact on your credit score typically diminishes over time, usually affecting your score for up to 12 months. After that, it usually has little to no influence.
Hard vs. Soft Inquiries
It's important to differentiate between hard and soft inquiries:
- Hard Inquiries: As discussed, these impact your score and occur when you apply for new credit.
- Soft Inquiries: These do not affect your credit score. Examples include:
- Checking your own credit report
- Pre-approved credit card offers
- Employer background checks
- Insurance quotes
Managing Hard Inquiries
To minimize the impact of hard inquiries on your credit score, consider these practical insights:
- Apply for Credit Strategically: Only apply for new credit when genuinely needed. Avoid applying for multiple lines of credit simultaneously unless you are rate shopping for a specific type of loan (like a mortgage or auto loan) within the allowed timeframe.
- Monitor Your Credit Report: Regularly check your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) for accuracy. You can obtain a free copy of your credit report annually from AnnualCreditReport.com.
- Build a Strong Credit Profile: Focus on maintaining a good payment history, keeping credit utilization low, and having a diverse credit mix to ensure your score can absorb the minor impact of a hard inquiry.
Understanding how hard inquiries affect your credit score is a crucial part of managing your financial health effectively. For more detailed information on credit inquiries and their impact, you can consult resources like Bankrate's guide on how credit inquiries affect your credit score.
