When a lender, creditor, or other entity pulls your credit, they are looking at the information on your credit report to help them make a decision about whether or not to approve you for a loan, credit card, or other line of credit. When a credit pull is made, it will show up on your credit report as a “hard inquiry.” Hard inquiries can have a small, but temporary impact on your credit score. The effect of a hard inquiry on your credit score depends on various factors, such as the number of inquiries in a short period of time, your overall credit history, and the total amount of credit you have.
Impacts of Credit Pulls on Your Credit Score
As with any other change to your credit report, credit pulls can affect your credit score. It’s important to understand what types of credit pulls will have a negative impact and how you can minimize their effects on your score. Generally, a single hard inquiry may lower your score by a few points, which may not have a significant impact on your credit score.
Credit Reports and Pulls
The three major credit bureaus, Experian, TransUnion, and Equifax, are responsible for collecting and storing all of your credit information. It is important to know where your credit stands in terms of the different bureaus because they do not always have the same information. Each credit bureau may have a different credit score for you because they receive and compile data from different sources.
Consumer Credit Pulls
Consumer credit pulls, also known as soft inquiries, are typically done by businesses that are considering offering you goods or services. These types of inquiries occur when a company requests access to your credit report to assess whether you are a good fit for their products or services. Because these inquiries are only used to better understand the customer they are not recorded on your credit report and do not impact your score.
Hard Inquiry Credit Pulls
A hard inquiry is a request for your credit report by a lender or creditor in order to make a decision about extending you credit or a loan. Hard inquiries are made when you apply for a credit card, loan, mortgage or any other type of credit. These types of credit pulls can have a small, temporary effect on your credit score.
Soft Inquiry Credit Pulls
Soft inquiry credit pulls do not typically affect a person’s credit score. Soft inquiries are generally done when an employer, financial institution, or other party requests a copy of your credit report or credit score. These credit pulls do not count as a “hit” on your credit report, so they have no impact on your score.
The Difference Between Hard and Soft Credit Pulls
Hard credit pulls, as described above, are requests for your credit report made by a lender or creditor in order to make a decision about extending you credit or a loan. On the other hand, soft credit pulls are requests for your credit report that do not impact your credit score. They are typically made by lenders for pre-approval offers, or for personal credit monitoring. These types of pulls will not show up on your credit report and won’t affect your credit score.
Minimizing the Negative Impact of Credit Pulls on Your Credit Score
- Limit the number of hard inquiries you have: Each hard inquiry can lower your credit score a little bit, so the fewer you have, the better.
- Space out hard inquiries: If you need to apply for multiple loans or credit cards, try to space out your applications so that they aren’t all done in a short period of time.
- Monitor your credit: Check your credit report and score regularly to see if there are any hard inquiries that you weren’t aware of, or if the score has dropped in an unexpected way.
- Keep your credit history positive: A long and positive credit history can help offset the negative impact of hard inquiries.
- Do research before applying: Compare rates, fees and terms before you submit your applications and choose the best options that fit your needs.