Each time you or somebody else requests a copy of your credit file, the request is recorded on your credit report as an “inquiry.” Inquiries are listed on your free credit report. There are two types, soft and hard inquiries, and they affect your credit score differently. Inquiries generally stay on your report for two years.
Soft inquiries do not affect your credit score. Soft inquires include
- Checking your free credit report through AnnualCreditReport.com.
- Reviews of existing accounts by lenders. For example, if you have a credit card, the credit card company likely checks your credit report from time to time.
- Prescreening by potential lenders. Credit reporting agencies are allowed to provide your contact information to companies that may pre-approve you for credit or insurance–for example, you may receive a pre-approved credit card offer in the mail. Although prescreening does not affect your credit score, OptOutPrescreen.com allows you to opt out of these offers and provides more information.
- Employer background checks.
When you apply for new credit like a loan or credit card, a hard inquiry appears on your credit report. Hard inquiries can lower your credit score because credit scoring takes into account how many hard inquiries appear on your report, as well as how frequently and recently they appear. However, the effects on your credit score will generally be small and in some cases zero. Any effects decline over time. Like all inquiries, hard inquiries disappear from your report within 24 months.
The Consumer Financial Protection Bureau observes that when you shop around for a loan by applying to multiple lenders, any affect on your credit score will be minor compared to how much you can save from finding a better deal. In fact, when you shop around, inquiries related to the same type of loan (for example, all auto loan inquiries) will be counted as one or zero inquiries if they are all made over a short period such as two weeks. The same is true for other types of loans including mortgages and student loans, but if you apply for different types of loans around the same time (for example, an auto loan and a mortgage), each type will be counted as a separate inquiry.
- Note that the rules differ for credit cards. Applying for multiple credit cards over a short period of time can hurt your credit score more than shopping for other types of loans.
- Consumer Financial Protection Bureau, Can shopping for a loan have an effect on my credit?
- myFICO, The effect of inquiries on FICO® scores
- Credit Karma, Hard Inquiries and Soft Inquiries