How Long Do Hard Credit Inquiries Affect Your Score?

How do Hard Credit Inquiries Impact Your Credit Score?

Any time you apply for any form of credit such as a credit card, an auto loan, a mortgage, or any other type of loan the lender will pull your credit by running a credit check on you. This is known as a credit inquiry. Inquiries can be of two types: soft inquiries and hard inquiries.

It is therefore worth understanding that soft inquiries also do not impact the credit score in any way. Such checks are performed when employers are conducting background checks when you have checked your credit when credit card companies made promotional offers to make you a cardholder, and when one is inquiring about insurance quotes, utility checks, and other select account review checks. These inquiries could appear on your credit report but they do not affect your score in any way.

While soft inquiries occur when you get pre-approved offers, hard inquiries occur when you apply for new credit. These include credit card, mortgage, auto loan, and non-motorized account inquiries and applications as well as inquiries from cell phone companies for new accounts. Hard inquiries are reflected on your credit report and can cause your score to reduce slightly.

This is why hard inquiries can lead to a very small drop in your score: applying for a lot of new credit simultaneously can be worrisome to lenders. They also hardly have a significant effect, and you can expect your score to rebound soon enough.

How long do hard inquiries remain on credit reports?

Hard inquiries are typically reported for a period of up to 2 years; however, they have a relatively minimal effect on your score in the subsequent year. New hard inquiries have a decreasing effect on credit scores.

Here is more about the timeline and how scoring models treat inquiries.

0 to 6 months: A new hard credit inquiry may cause a credit score to decrease by as much as five points as per the FICO and VANTAGE scoring systems. Subsequent inquiries have a lesser effect.
6 months to 1 year: Inquiries start reducing their effects similarly as shown above and disappear from the scorecard after 12 months.
1 year to 2 years: Any inquiries are not reflected in the score after a year and their points are not counted. The same is true with VantageScore, which also reduces influence but still can involve points from the past.
After 2 years: Hard inquiries are removed from credit reporting and are unaltered.

It is important to remember that the effects of hard credit inquiries are generally overstated. Some scoring models take into consideration the number of hard inquiries in a short time frame as an indication of risk, but having one or two more hard inquiries will not reduce your credit score by 50 to 100 points or more. Smaller drops ranging between 0 and 5 points are more common.

Strategies for Reducing the Number of Hard Inquiries When Credit Scores are an Issue

If, for example, you are planning to take a large loan, such as a mortgage, that will demand a high credit score, it is advisable to keep track of inquiries. Consider these tips:

Before you apply for a new credit, make sure that you go through your credit report and notice the current inquiries.
In order to increase the chances of success, it is better to apply for as many grants as possible within a short span of time.
If rate shop for certain loans such as mortgages or auto loans, then do it within a limited timeframe as major scoring models have grouped these inquiries.
Consider whether those expenses and that new credit card you desire are worth an additional inquiry before you apply.

How do Inquiries Impact Certain Score Models?

If your goal is to keep your credit score in excellent shape, here is how different models treat hard inquiries.

The FICO Score Versions:

While FICO versions 8 and 9 are somewhat different in their approach, they do not consider hard inquiries that are older than 12 months. It also does not fade and they will still show for up to 2 years though.

Another important fact is that FICO 9 is the least severe model. However, one point is not deducted regardless of the number of inquiries made by the student. It also permits some rate checking and balancing regarding specific types of loans within a limited period.
FICO 8 can reduce a score by up to 10 points if a single inquiry is made. Following that, the subsequent queries are not as influential. It is also important to point out that rate-shopping loans might still end up being categorized together.

The VantageScore Versions

Like Equifax, VantageScore 4. 0 will count inquiries against you for up to 2 years, although the effects are only mild after the first year. More inquiries do not significantly affect your score.

VantageScore 3. 0 also functions similarly but may lower scores for multiple inquiries more drastically. One inquiry can cost the score up to 20 points.

Monitoring Your Credit

To monitor your credit, you can obtain your credit reports from all three credit bureaus at www. annualcreditreport. com. This will not display your exact credit score but you will be able to view your accounts and new inquiries to check for accuracy and inquiries.

It is also important to consider credit monitoring so that you can monitor the score often and be notified in case of any change. By monitoring, you can ensure that your credit score remains as high as possible.

Paying all of the bills on time every month, keeping credit balances low, limiting the number of credit inquiries, and keeping a long credit history all help to make sure that the credit scores are good for any future large purchases of items that will require financing. Make sure you allow enough time for its recovery in case of any new hard inquiries to ensure that your score is at its best at the time it is most important.