One of the most common questions we get at Taxracy is, "Will checking my rate hurt my credit score?" It's a valid concern. You want to shop around for the best rates on loans or credit cards, but you're afraid that multiple applications will tank your score.
The truth is, not all credit checks are created equal. Understanding the difference between a hard inquiry and a soft inquiry is key to managing your credit health while still accessing the funding you need.
Hard Inquiries vs. Soft Inquiries
There are two types of inquiries that can appear on your credit report:
1. Soft Inquiries (No Impact)
A soft inquiry (or "soft pull") happens when you check your own credit or when a lender checks your credit for pre-approval offers. Employers and landlords may also use soft pulls.
Impact on Score: Zero. Soft inquiries do not affect your credit score and are only visible to you.
2. Hard Inquiries (Temporary Impact)
A hard inquiry (or "hard pull") occurs when you officially apply for new credit, such as a mortgage, auto loan, or credit card. By submitting an application, you are authorizing the lender to review your full credit report.
Impact on Score: A hard inquiry typically lowers your score by 5 to 10 points. While this seems minor, multiple hard inquiries in a short period can add up and signal to lenders that you are desperate for cash.
How Long Do Inquiries Stay on Your Report?
Hard inquiries remain on your credit report for two years. However, they only impact your FICO score for the first 12 months. After a year, they are still visible but no longer affect your calculation.
The "Rate Shopping" Exception
The credit scoring models (FICO and VantageScore) understand that smart consumers shop around. If you are applying for a specific type of loan—like a mortgage, auto loan, or student loan—multiple inquiries within a short window (usually 14 to 45 days) are often treated as a single inquiry.
Note: This grouping rule does NOT apply to credit cards. Each credit card application counts as a separate hard inquiry.
How to Minimize the Impact
- Check for Pre-Approval: Many lenders offer a "check your rate" feature that uses a soft pull. Always use this first to see if you qualify before submitting a full application.
- Apply Within a Window: If you are shopping for a car or home, do all your applications within a 2-week period to ensure they are grouped together.
- Review Your Report: Sometimes, inquiries appear that you didn't authorize. If you see a hard pull from a company you don't recognize, you can dispute it.
We Can Help Remove Unauthorized Inquiries
If your credit report is cluttered with excessive or unauthorized inquiries, it could be dragging down your score. At Taxracy, our credit repair audit includes a review of all inquiries to ensure they are legitimate.
Don't let fear of inquiries stop you from reaching your financial goals. Book a consultation with us today to build a strategy that protects your score while you grow.