What are credit inquiries? Everything you need to know

When you apply for a loan or line of credit, lenders will want to check your credit history. This gives them a view of your financial track record, helping them make a decision on your application. This step in the process is called a credit inquiry. It’s not as intense as it might sound. In fact, credit inquiries are a totally routine part of securing credit or a loan, like getting a mortgage, opening a new credit card, or taking out an auto loan.

Let’s break down how credit inquiries work and how you can manage them in a way that supports your goals.

The highlights:

• Credit inquiries are how companies can access your credit report, and they’re a normal part of getting approved for loans and other financial obligations, like renting an apartment.
• There are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries may have a temporary effect on your credit score. You can minimize their impact by avoiding multiple inquiries on your report in a short period of time.
• Checking your own credit report is considered a soft inquiry, so it won’t affect your credit, and it’s an easy way to keep track of your inquiries, spot any inaccuracies, and stay in control of your credit score.

What’s a credit check?  

You might see the terms credit check, credit pull, and credit inquiry used interchangeably, and they generally refer to the same thing. An inquiry happens when someone requests information from a credit bureau to check your credit history, which includes details on your credit accounts, payment history, and any debt you may be carrying.

Your credit report also includes a record of past inquiries, but only hard inquiries affect your credit score. Soft credit inquiries, on the other hand, do not affect your score.

Understanding hard inquiries

When you apply for credit or take on a financial commitment like renting an apartment, you’ll likely be asked to authorize a hard credit inquiry as part of the application. No lender or financial institution can conduct a hard inquiry without your permission.

Here are a few examples of when a hard inquiry might take place:

• Credit card applications
• Mortgage and car loan applications
• Personal line of credit applications
• Rental applications

Unlike soft inquiries, hard inquiries may temporarily lower your credit score by a few points. But don’t let that scare you. For starters, using a credit card responsibly and making payments on reasonable loans are great ways to build good credit—and hard inquiries are part of getting that credit card and those reasonable loans in the first place. Even multiple hard inquiries have a small and relatively short-term impact on your credit score when compared to more important factors like your payment history, your debt burden, and the age of your accounts.

With your FICO^® score, which is one of the most common credit scoring models, inquiries only impact about 10% of what makes up your overall score. And while hard inquiries stay on your credit report for up to two years, they only affect your FICO^® score for one year.^{Disclosure 1}

So how many credit inquiries is too many for lenders reviewing your credit? There’s no strict rule here, but data shows that six or more hard inquiries in a short period of time could lead to negative outcomes down the road—and could make you less attractive to lenders.

However, you can take steps to reduce the number of hard inquiries counted toward your credit score. More on that to come, along with some additional tips on managing inquiries in a way that can help you build or maintain good credit.

How soft inquiries are different

A soft inquiry takes place when someone checks your credit for informational purposes. While these might appear on your credit report, they’re only visible to you. They won’t affect your credit score because you’re not making a request for a loan or credit, or taking on a new financial obligation.

Here are a few situations where you might see a soft inquiry:

• Insurance quotes
• Employment background checks
• Prescreened credit card offers
• Requests for your own credit report

With exceptions—like background checks at a new job—companies don’t necessarily require your permission to conduct a soft inquiry. If you’ve ever gotten a credit card offer in the mail, there’s a good chance a company conducted a soft inquiry to prescreen potential applicants.

3 tips for managing credit inquiries

Whether you’re trying to minimize the negative impact hard inquiries may have on your credit score or reviewing your credit report for inaccuracies, these three tips can help you take more control of your credit.

1. Start with a little research.

Considering your options for a mortgage or looking around for a credit card with great rewards? A little online research may help you make a better decision—and narrowing down your list of potential lenders first could save your credit report from multiple inquiries.

“Check out a company before you let them check your credit,” says Brian Ford, head of financial wellness at Truist. “If you can narrow down your list of options to just two or three lenders that you like before applying, you’ll get fewer hard inquiries that may affect your credit score.”

2. Go on a rate-shopping spree.

You can’t avoid hard inquiries altogether. But there’s a big difference between shopping for a single loan (such as an auto loan, student loan, or mortgage) and applying for multiple credit cards at the same time, and credit scoring models will typically recognize the distinction.

• Single loan: When FICO^® calculates your credit score, it may treat multiple hard inquiries for a single purpose—like shopping for a mortgage—as one inquiry as long as those inquiries take place within a time window that can range from 14 to 45 days (depending on which specific FICO^® model is being used).^{Disclosure 2} If you’re searching for the best deal on a car loan, for example, you can do all your rate shopping within a couple weeks to avoid taking a bigger hit to your credit score. FICO^® will also ignore those inquiries while they’re under 30 days old, and they won’t affect your credit score while you compare offers from different lenders in that period.
• Multiple credit cards: Every time you apply for a credit card, the lender checks your credit and that triggers a hard inquiry. FICO ^® considers each credit card application as one hard inquiry. So, If you’re applying for six new credit cards at once, then the credit scoring models will likely consider this activity as six hard inquires.

“Put yourselves in the shoes of the lender. If a lender sees two or three hard inquiries together for an auto loan and three or four inquiries together for a mortgage a year or more later, that’s totally reasonable,” Ford says. “But if the lender sees multiple applications for car loans and mortgages and credit cards all at the same time, that may look pretty desperate and could raise your risk profile.”

“If your credit score is not where you’d like it to be, your credit report can tell you why.”—Brian Ford, Truist head of financial wellness

3. Check your credit yourself.  

Your credit report and your credit score are two different things. Your credit report is a detailed record of your credit history that’s used to calculate your credit score, which is a number that represents your creditworthiness. (Promise, there’s no quiz at the end of this article.)

Regularly checking both your credit report and your credit score is a good financial habit. Your bank will typically allow you to check your credit score for free and may offer additional credit monitoring features. Every year, you can also request a free copy of your credit report from each of the three major credit bureaus through AnnualCreditReport.com. And in case you’re wondering, this counts as a soft inquiry and has no effect on your credit score.

“If your credit score is not where you’d like it to be, your credit report can tell you why so that you can take action to address it,” Ford says. “Going through your report also gives you a chance to make sure everything’s accurate and check for potential signs of fraud or identity theft.”

Look out for any errors in your personal details, including your name and Social Security number, as well as any unauthorized accounts, unexpected inquiries, or unexplained changes in your account balances. As for how to remove credit inquiries from your report if you think they’re incorrect, contact the credit bureau that sent you the report as well as the specific lender or company that provided the incorrect information. The report itself will also include instructions for working through disputes.^{Disclosure 3}

If you think you’re a victim of identity theft or your credit is compromised, you’ll also want to alert all the major credit bureaus, freeze your credit, and file a report with your local police department. This page has more on steps to follow if you suspect you’re a victim of fraud.

Putting credit inquiries in perspective

Often, people may feel anxious about complicated money topics. “When we feel like we don’t understand something, we feel like we don’t have control,” says Bright Dickson, the resident happiness expert at Truist and co-host of Money and Mindset With Bright and Brian. When you gain knowledge, you can take action based on what you’ve learned, Dickson says. And that can make you feel better and more in control.

Credit inquiries are a topic that may seem confusing at first. But knowing how they work can help you realize they’re a manageable part of building a good credit score and history. That can lead to better deals on loans and access to more financial opportunities, all while helping you build your confidence with money.

Next step suggestions:

• Request a copy of your credit report and see how many inquiries you’ve had in the last two years.
• Planning to apply for a loan in the near future? Research your loan options before submitting a bunch of applications that can result in hard inquiries. And be sure to limit your rate shopping to a short period of time to limit how many inquiries are counted on your report.
• Keep working to build or maintain that credit score! Making on-time payments on a secured credit card, for example, can help you establish good credit and money habits.