How Do Credit Inquiries Affect My Credit Score?

If you've ever worried that checking your credit score might hurt your credit, you're not alone. The good news is that not all credit inquiries affect your score the same way. Understanding the difference between hard and soft inquiries can help you make informed borrowing decisions and protect your credit health.

Hard vs. Soft Inquiries: What's the Difference?
A hard inquiry occurs when you apply for credit, such as a mortgage, auto loan, or credit card, and a lender reviews your credit report as part of the approval process. Hard inquiries can lower your credit score by a few points, but the impact is usually temporary. While the inquiry remains on your credit report for up to two years, its effect on your score typically fades within a few months.

A soft inquiry, on the other hand, has no impact on your credit score. Soft inquiries occur when you check your own credit, receive a pre-approved offer, or undergo certain background checks.

Be Strategic When Applying for Credit
One hard inquiry generally isn't a cause for concern. However, applying for several new credit accounts in a short period can signal higher risk to lenders. Fortunately, credit scoring models recognize that consumers often shop around for the best loan rates. When you're comparing offers for the same type of loan, such as a mortgage or auto loan, multiple inquiries made within a short period are typically treated as a single inquiry.

If you're rate shopping, try to submit your applications within the same 14- to 45-day window, depending on the credit scoring model being used. You can also use pre-qualification tools when available. These typically rely on soft inquiries, allowing you to compare offers without affecting your credit score.

Focus on the Factors That Matter Most
While inquiries do play a role in your credit score, they're far less important than your payment history, credit utilization, and length of credit history. For most people, a single hard inquiry has little long-term impact. However, if you have a limited credit history, even a small change in your score may be more noticeable.

The best way to build strong credit is through consistent habits:

• Pay bills on time.
• Keep credit card balances low.
• Avoid taking on more debt than you can manage.
• Build credit gradually over time.

Products such as secured credit cards and credit-builder loans can also help establish or strengthen your credit history.

The Bottom Line
Credit inquiries are a normal part of borrowing money and shouldn't discourage you from pursuing your financial goals. The key is understanding the difference between hard and soft inquiries, limiting unnecessary credit applications, and focusing on the long-term habits that have the greatest impact on your credit score.

A strong payment history and responsible credit use will always matter more than a single inquiry.

And remember, as a CommonWealth member, you can contact one of our Certified Financial Counselors for free sessions about tools and products to help monitor, manage, or improve your score.