How Many Hard Credit Inquires is Too Many?
Did you know that several hard inquiries on your credit report can negatively impact your credit score? But what is a hard credit inquiry? And how many inquiries is too many?
A credit inquiry, or credit pull, is a request to look at your credit history. Credit inquiries fall into two categories: soft inquiries and hard inquiries. Lenders base pre-approval offers on soft credit inquiries. Checking your own credit report is also considered a soft credit inquiry. With soft credit inquiries, you’re not yet applying for new credit, so they won’t have an impact on your credit score.
Hard credit inquiries, on the other hand, are a different matter. Read on to learn about hard inquiries and how many hard credit checks is too many.
How hard inquiries work
A hard credit inquiry typically occurs when you apply for a new loan or credit card and the lender pulls your credit report. There are also other instances that result in a hard credit check, such as when you submit an application for an apartment or new utilities.
Statistically, consumers who apply for new credit are riskier than those who do not. This is why multiple hard inquiries can cause your credit score to decline.
How much does a hard inquiry lower my credit score?
One hard credit inquiry might lower your credit score by five points or less. That may sound insignificant, but inquiries stay on your credit report for at least 12 months. As such, your credit score could significantly decline if you have multiple hard inquiries within that timeframe.
Can I dispute a hard credit inquiry?
Most hard credit inquiries cannot be removed from your credit report. However, you can dispute a hard inquiry if you believe you didn’t authorize it.
Contact the lender that made the credit check to dispute a hard credit inquiry. The organization’s contact information should be listed on your credit report, but if not, call the credit reporting agency and ask for the phone number. You can then ask the organization to provide proof that you authorized the hard inquiry.
If you can’t track down the source of a hard inquiry, file a dispute with the credit bureau directly. They will have to either confirm the inquiry’s legitimacy or remove it from your credit report.
How to minimize the impact of hard credit checks
You can’t always avoid hard credit inquiries, but you can minimize their impact by doing the following:
Check your credit often
Checking your credit report regularly can help you stay on top of hard inquiries you didn’t authorize. You can also see the impact any legitimate hard inquiries have on your credit score.
Make consistent on-time payments
Your payment history is the most important factor in determining your FICO credit score. When you make your monthly payments on time and build good credit, you’re less likely to be impacted by a hard credit inquiry.
Only apply for credit when needed
Be mindful of how often you apply for loans and credit cards. Each application you submit results in a hard credit inquiry, so you want to space them out.
There’s no set rule for how long you should wait to apply for new credit, but some lenders won’t approve you for new credit if you’ve opened five new credit cards within the last two years.
Pay off your debt
Paying off debt improves your credit utilization ratio, which can drastically boost your credit score. With a healthy credit utilization ratio, you’re less likely to be affected by a hard inquiry.
Go rate shopping
Have you ever applied for a credit card because you received a pre-approval offer in the mail? Or applied for a retail store card you were offered at checkout? These can be great ways to get new credit. . . until you find a better option with lower rates.
Before applying for new credit on a whim, shop around to compare rates. Doing so can help you avoid multiple applications and hard inquiries.
You don’t need good credit to get a loan
Even if you have poor credit due to multiple hard inquiries, you still have options. For example, you don’t need good credit to qualify for a loan from Advance America. In fact, applying for an Advance America loan won’t impact your FICO credit score!