Your credit score is an important number that lenders use to assess your creditworthiness. It is based on your credit history, which includes information about your past borrowing and repayment habits. Hard inquiries are a type of credit inquiry that can impact your credit score. Learn more about various credit score services offered by Shriram Finance.
What Is a Hard Inquiry?
A hard inquiry, often known as a "hard pull," occurs when you apply for a new line of credit, such as a credit card application or an auto loan. It signifies that a creditor has requested to review your credit report to assess the level of risk you offer as a borrower.
Hard inquiries appear on your credit record and can have an impact on your credit score. As a result, it's critical to understand when they occur, how they affect you, and why it's ideal to keep them to a minimum. Here's everything you need to know about difficult questions.
How Long Does a Hard Inquiry Stay On Your Credit Report?
Hard inquiry credit scoresstay on your credit report for two years, but they only affect your credit score for one year.
What Triggers a Hard Inquiry on Your Credit Report?
Hard inquiries are triggered when you apply for various forms of credit, including loans, student loans, credit cards, and mortgages. Additionally, they can be initiated when you apply for jobs that require credit checks or when you rent an apartment.
How Do Hard Inquiries Affect Your Credit Score?
Hard inquiries hurt your credit score and it can vary based on your overall credit history. If you have a robust credit history, a single hard inquiry may only lead to a minor credit score decrease. However, if your credit history is less favourable, a hard inquiry could have a more significant negative impact.
What Are Inquiries on Your Credit Report?
Hard and soft inquiries, often known as credit checks, are requests to inspect your credit report made by lenders, landlords, employers, and other entities with the authority to do so. Your credit report will reflect both hard and soft queries. Only one form of inquiry, however, affects your credit score. The following are the key distinctions between hard inquiries vs soft inquiries.
- Hard inquiries: When you apply for a loan or credit card from a lender, it results in a hard inquiry. When someone accesses your credit report in connection with a credit application, a hard inquiry appears on your credit report. Lenders can only view your credit report if they have a legal reason to do so.
- Soft inquiries: When a firm or individual receives limited information to make a promotional offer or check your credit as part of the screening process, a soft credit inquiry may appear on your credit report. Only you have access to your credit report's soft queries.
Inquiries on your credit report can provide lenders with information about your borrowing habits and how often you are applying for new credit. This information can help lenders assess your creditworthiness and make decisions about whether or not to approve you for a loan or credit card.
What Does a Lender Think When They See a Hard Inquiry?
When a lender reviews your credit report and observes a hard inquiry, it indicates that you've recently applied for credit with another financial institution. While it may suggest financial need or plans to take on more debt, lenders also recognize that consumers often shop around for the best loan or credit card offers and rates. Consequently, a few hard inquiries are not necessarily detrimental to your creditworthiness.
However, if you possess a mediocre credit history, lenders may be more concerned about the presence of hard inquiries on your credit report.
How to Minimise the Number of Hard Inquiries you make?
To reduce the number of hard inquiries on your credit report, consider the following strategies:
- Shop around wisely: Before applying for loans or credit cards, use pre-qualification tools to estimate your approval likelihood without triggering hard inquiries.
- Avoid rapid applications: Be cautious about submitting multiple credit applications in a short timeframe, as this may raise concerns about your financial stability.
- Regularly review your credit report: Monitor your credit report regularly and dispute any inaccuracies with the credit bureaus to maintain an accurate credit history.
Conclusion
Hard inquiries can hurt your credit score, but the impact is usually temporary. Your credit score will typically rebound within a few months of the hard inquiry. By understanding how hard inquiries work and how to minimise their impact, you can protect your credit score.
At Shriram Finance, we understand that hard inquiries can hurt your credit score. If you are looking for a loan and are concerned about the impact of a hard inquiry on your credit score, please contact Shriram Finance today. We can help you find the right loan for your needs without damaging your credit.
Key Highlights
- Hard inquiries occur when a lender checks your credit report when you apply for a loan or credit card.
- Hard inquiries are recorded on your credit report and can stay there for up to two years.
- Hard inquiries can have a small negative impact on your credit score.
- If you have a good credit history, a hard inquiry may only lower your score by a few points.
- The impact of a hard inquiry on your credit score is usually small and temporary.
FAQs
1. How many points does 1 hard inquiry affect credit score?
A single hard inquiry typically lowers your credit score by less than five points.
2. What is a hard inquiry on credit score?
A hard inquiry is a type of credit inquiry that occurs when a lender checks your credit report when you apply for a loan or credit card. Hard inquiries are recorded on your credit report and can stay there for up to two years.
3. Do all hard inquiries affect credit scores?
All hard inquiries affect your credit score, but the impact is usually small and temporary. Your credit score will typically rebound within a few months of the hard inquiry.
4. How bad are 3 hard inquiries?
Three hard inquiries in a short period of time may indicate to lenders that you are in financial trouble or that you are planning to take on more debt than you can afford. However, lenders also understand that people shop around for the best interest rates on loans and credit cards, so a few hard inquiries are not necessarily a bad thing.
