You have probably heard about how an inquiry about your credit score can lower the score. This sounds ridiculous and counter-intuitive to what a credit score is supposed to be, mainly because if your are trying to do a Quick Credit Repair, then you will have to check your credit score as well. Once you understand credit inquiries you will understand why and when they affect your credit score. Some credit inquiries affect your score, while others do not.
The summary is that any credit inquiry which indicates that you may be obtaining more credit, defaulting on an existing payment or being audited, will end up affecting your credit score negatively. Other types of inquiries will not affect your credit score in any way. Inquiries can be divided into two types: hard inquiries and soft inquiries.
Hard Credit Inquiries
Hard inquiries are the inquiries which have a negative effect on your credit score. These are the ones made by someone else about you. Why does this lower your credit score? Because it can indicate that you have been applying for credit, which means you need more credit. Since your credit score is supposed to show what your credit rating is, needing more credit means it may be harder for you to repay any loan you may be taking out. Hard inquiries happen for many reasons, which include:
Whenever you apply for a loan (it may be an auto loan, student loan, or even a personal loan)
- When you apply for a mortgage
- When you apply for a new credit card
- Auditing being done by IRS
Generally, a hard inquiry will not affect your credit score too much, and your score should be able to recover in 6-12 months.
Soft Credit Inquiries
Soft inquiries are inquiries about your credit score which are made by you or another organization without any financial transaction attached or expected to them. If you check your credit score, it is considered a soft inquiry and it will not affect your credit score in any way. If someone does a standard background check on you (such as a new employer), that too will be considered a soft inquiry and will not affect your credit score.
If you think your credit score is going to be checked by a company and don’t want to lower your score, simply ask the company if they will run a hard inquiry or a soft inquiry. There are ways to dispute hard inquiries as well. Your credit report will mention who made the hard inquiries. Contact the offending party in order to start the process of getting it removed from your score.