I've heard that hard inquiries can hurt your credit score. How much do they hurt and how long do they stay on your credit report?
Good question. For those who don't already know, a credit inquiry is an item on your credit report that shows other businesses that have requested a copy of your credit report.
There can be numerous inquiries on your credit report at any given time. A prospective employer may check your credit. A business with whom you already have credit may check your report to see how your situation may have changed since they first issued you credit. Or, a business may check your credit before they make you a "pre-approved" offer of credit. These are called soft inquiries and do not affect your credit score.
A hard inquiry results when you apply for credit. The creditor obtains a copy of your credit report, resulting in the hard inquiry.
How much does a hard inquiry hurt your credit score? Well, it depends. You see, there are five major components to your credit score: payment history, amount owed, length of credit history, new credit, and types of credit. Credit inquiries are a subset of New Credit.
The New Credit component makes up 10% of your credit score. So, for a big credit report that has a long history, a good payment history, several types of credit and a good ratio of credit used versus credit extended, a hard inquiry will have little or, even, no effect.
If you have a small credit report without much information, a hard inquiry will have a larger effect.
Inquiries remain on your credit report for two years. Your credit report activity changes every month as you pay bills and add time to your credit history. These two factors reduce the impact of an inquiry fairly quickly, again depending on your personal credit report.
You can find more information about how your credit score is calculated by reading the article, Credit Report Score Chart.
You can also find more information in the article, Good Credit Score - Frequently Asked Questions.
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