Table of Contents
If you’re managing your credit, chances are you’ve heard that credit inquiries can hurt your credit score. But what exactly happens when your credit is checked? How much does a credit inquiry impact your score? And how can you manage this process to avoid unnecessary damage? You also might want to know the truth about credit inquiries and score drops.
Many consumers worry about the effect of credit checks and avoid monitoring their credit or applying for new credit because of misinformation or confusion around this topic. Understanding credit inquiries—the different types, how they affect your score, and how to manage them—can help you avoid unnecessary score drops and make smarter financial decisions. It can also ease many people’s anxiety when checking their credit or applying for new loans.
In this comprehensive guide, we’ll uncover the facts about credit inquiries, explore the difference between soft and hard inquiries, explain how they impact your score, dispel common myths, and provide actionable tips to protect and improve your credit. Plus, we’ll show how Beem’s credit monitoring tools can help you stay informed and in control.
What Are Credit Inquiries?
A credit inquiry occurs whenever someone accesses your credit report. This is a request to view your credit history to assess your creditworthiness.
Credit inquiries are logged on your credit report, showing who checked your credit and when.
There are two main types of credit inquiries:
- Soft inquiries: These happen without your explicit application for new credit.
- Hard inquiries: These happen as part of a formal credit application process.
Read related blog: Why Multiple Credit Scores Exist and Which One Matters Most
Soft Inquiries: What Are They and Why Don’t They Affect Your Credit Score?
Soft inquiries, often called soft pulls, are credit checks that do not affect your credit score. They are usually informational or background checks.
Examples of soft inquiries include:
- When you check your credit report or credit score, this is your right under the Fair Credit Reporting Act and should never harm your score.
- When lenders pre-approve you for credit offers without a formal application. These offers are based on soft inquiries.
- When existing creditors review your account for account management purposes like credit line increases or promotional offers.
- Background checks by employers or landlords are typically conducted with your permission.
Soft inquiries appear on your credit report only for viewing and are not visible to lenders, so they do not impact lending decisions or your score.
Why is this important?
Because it means you can check your credit score as often as you want through apps like Beem without worrying about damaging your credit. Regular monitoring is key to maintaining good credit health and spotting fraud early.
Hard Inquiries: What Are They and How Do They Affect Your Credit Score?
Hard inquiries or pulls happen when you apply for new credit, and lenders pull your credit report to make a lending decision.
Everyday situations that trigger hard inquiries include:
- Applying for credit cards
- Applying for mortgages or home equity loans
- Applying for auto loans or leases
- Applying for personal loans or lines of credit
- Sometimes, when requesting credit limit increases (depending on the lender)
Since hard inquiries indicate you seek new credit, credit scoring models treat them as a potential risk factor. For this reason, hard inquiries can cause your credit score to drop slightly.
How Much Do Hard Inquiries Impact Your Credit Score?
The effect varies by individual, but generally:
- One hard inquiry can lower your score by approximately 5 to 10 points.
- The impact may be larger if you have a limited credit history because fewer data points exist to offset the inquiry.
- The impact is temporary — hard inquiries usually affect your score for about 12 months but remain on your report for two years.
It’s important to remember: Compared to other factors like missed payments or high credit utilization, the impact of a single hard inquiry is relatively small and short-lived.
Why Are Multiple Hard Inquiries a Concern?
When multiple hard inquiries occur within a short time, it can suggest to lenders that you’re experiencing financial distress or taking on more debt than you can manage.
However, credit scoring models recognize that consumers shop for the best rates on certain mortgages or auto loans. To accommodate this, multiple inquiries for the same type of loan within a 14 to 45-day window are typically counted as one inquiry.
This is known as rate-shopping protection and prevents undue penalties when comparing loan offers.
When Exactly Do Hard Inquiries Occur?
You might face hard inquiries on your credit when you:
- Apply for a new credit card or loan
- Apply for a mortgage or refinancing.
- Lease or finance a new vehicle
- Request a personal loan or a new line of credit.
- Occasionally request a credit limit increase, depending on the lender’s policies.
It’s a good practice to ask lenders upfront if they will perform a hard or soft inquiry before you start a loan or credit application.
Can You Avoid Hard Inquiries?
While hard inquiries are necessary for new credit approvals, you can minimize their negative impact by:
- Applying for new credit only when necessary. Don’t apply impulsively.
- Consolidating your credit applications into a short time frame when rate-shopping for the same type of loan.
- Monitoring your credit regularly with Beem to keep track of inquiries and catch any unauthorized ones quickly.
What if You See Unauthorized Hard Inquiries?
Hard inquiries made without your permission might indicate identity theft or fraud. Here’s what you should do:
- Review your credit reports regularly (free once yearly from each bureau at AnnualCreditReport.com).
- If you spot suspicious inquiries, report them immediately to the credit bureaus and the Federal Trade Commission (FTC).
- Consider placing a fraud alert or credit freeze to prevent new accounts.
- Use Beem’s real-time alerts to instantly stay on top of any new inquiries.
Read related blog: How Long Does Negative Info Stay on Your Credit Report?
Debunking Common Myths About Credit Inquiries and Score Drops
Myth #1: Checking your credit hurts your score.
Fact: Checking your credit or using services like Beem triggers a soft inquiry, which does not affect your score.
Myth #2: All credit checks are equal and reduce your credit score.
Fact: Only hard inquiries affect your credit score; the impact is minor and temporary.
Myth #3: Multiple hard inquiries always tank your credit.
Fact: Multiple hard inquiries for the same type of loan during a rate-shopping window count as one inquiry and minimize score impact.
How Beem Helps You Manage Credit Inquiries and Protect Your Score
Managing credit inquiries can feel overwhelming, but Beem makes it simple:
- Instant Alerts: Receive immediate notifications for new hard or soft inquiries on your credit report.
- In-Depth Tracking: Understand when and who pulled your credit and what type of inquiry it was.
- Score Simulator: Model potential score impacts before applying for new credit.
- Educational Resources: Learn how inquiries fit into your overall credit picture and best management practices.
Using Beem, you stay ahead of credit changes, avoiding surprises and strategically planning credit actions to protect your score.
Real-Life Example: Avoiding Score Drops with Informed Timing
Take Lisa, who planned to buy a car. She used Beem to monitor her credit inquiries and score closely. Before applying for an auto loan, she checked which recent inquiries appeared on her report and waited until the rate-shopping window allowed new inquiries to be grouped. By timing her applications carefully, Lisa avoided unnecessary score dips and secured a favorable loan rate.
Read related blog: How Does Credit Age Affect Your Score?
FAQs: The Truth About Credit Inquiries
How long do hard inquiries affect my credit score?
Hard inquiries typically impact your credit score for up to 12 months but remain visible on your credit report for two years. Most of the effect fades after the first year, and inquiries no longer appear after two years.
Can too many hard credit inquiries cause me to be denied credit?
Yes. Recent hard credit inquiries can signal financial distress and cause lenders to view you as a higher risk, potentially leading to denial or less favorable terms.
Does applying for multiple credit cards at once hurt my credit?
Yes, applying for several credit cards in a short time can result in multiple hard inquiries, temporarily lowering your score and raising red flags for lenders.
Are soft credit inquiries visible to lenders?
No. Soft credit inquiries are only visible to you and do not impact lending decisions.
How often should I check my credit to avoid hard inquiries?
You can check your credit score and report as often as you want through services like Beem without harming your score because these are soft inquiries.
Stay Proactive, Stay Informed
Credit inquiries are a natural part of managing your finances. Knowing the difference between soft and hard inquiries, understanding their impact, and monitoring them regularly can help you avoid unnecessary score drops and maintain a healthy credit profile.
With Beem’s tools at your fingertips, you can track inquiries in real-time, simulate their impact, and plan your credit actions strategically—empowering you to build and protect your credit for the long term. Download the app now!
