How Much Do Hard Inquiries and Soft Inquiries Affect a Credit Score?

FT Contributor
A woman filling out a credit check application on a table.

When you’re working on building your credit score, or maintaining a good score, every little thing counts. Although your payment history and account balances are the most important factors in your score, credit inquiries can potentially have a negative effect on the overall number.

There are two different types of credit inquiries: soft and hard. Soft inquiries don’t impact your credit score, making it possible to monitor your overall credit history and shop for rates without damaging your credit score. Hard pulls, on the other hand, can knock points off your score, and too many in one year can make a significant difference to whether you qualify for credit and the rates you’re offered. The question, then, is by how many points do credit inquiries lower your score?

Table of Contents

Soft Credit Inquiries

When you or a creditor makes a soft inquiry into your credit, it means that it’s being checked for informational purposes, such as checking your credit history or pre-screening for a credit card offer. It reveals information about your accounts, payment history, balances, collections, liens, bankruptcies, etc. to the requestor, but it isn’t tied to a specific application to borrow more money. Rather, it’s simply a mechanism to determine whether you are eligible for credit, and ensure that everything is being reported correctly and you’re meeting your obligations. Because soft inquiries are only informational, they don’t affect your overall score, but they do appear on your credit report.

Some of the reasons for soft inquiries on your credit report might include:

  • Checking your own credit;
  • Businesses conducting pre-screening for offers, including credit cards, insurance plans, cell phone carriers;
  • Existing creditors monitoring your credit for rate/credit limit increases or decreases;
  • Insurance companies determining rate eligibility;
  • Debt settlement companies evaluating your credit for negotiations.

Again, these inquiries will not affect your credit, as they often happen without your knowledge or consent, in particular when it comes to prescreened offers. Only when you accept such an offer and actually apply for additional credit will that inquiry become a hard inquiry.

Hard Credit Inquiries

Unlike a soft inquiry or soft pull, a hard inquiry into your credit is associated with a specific application for credit. The credit bureaus differentiate this type of inquiry because it indicates you are looking to borrow more money. In order for a hard inquiry to take place, you need to sign an application authorizing the creditor to pull the report.

Hard inquiries occur when you apply for a new credit card or line of credit, a mortgage, student loan, or a car loan. Requesting a credit limit increase on an existing credit card can also result in a hard inquiry. Unlike soft inquiries, these pulls will have an effect on your overall credit score. How many points does a hard inquiry affect a credit score? FICO scores may decrease 5-10 points for each inquiry, while your VantageScore can possibly go down by as many as 20 points.

How Long Do Hard Credit Checks Stay On Your Credit Report?

On average, a hard inquiry will remain on your credit report for about 2 years, after which it disappears. Your impact on your score won’t last as long, though. Most points that are lost due to hard inquiries are restored within a few months, because either the inquiry resulted in a new account (which is now being reported) or no new account, meaning there is no new risk.

That being said, hard inquiries do result in temporary score reductions. How many points you lose depends on several variables, including the type of credit you’re seeking and the length of time between inquiries. For example, if you apply for a new credit card, the inquiry will likely reduce your score by 4-5 points, regardless of whether you’re approved or not. If you apply for several new credit cards within a few months, though, you’ll see your score drop by as much as 50 points based on the inquiries alone. How you use those new accounts will impact your score even more.

The primary exception to this rule is when you apply for vehicle loans or mortgages. When you apply for these loans, you want to get the best possible rate, which means checking with several different lenders. Therefore, multiple inquiries for the same product in a short period (less than 14 days) are typically handled as a single inquiry, so as to avoid reducing the applicant’s score. Once the account is opened, the inquiry drops off the report. In some cases, inquiries for car loans and mortgages are treated as soft pulls, so they don’t affect a credit score at all.

What Else Affects Credit Scores?

Hard inquiries into your credit score are just one factor that the credit bureaus use in the calculation. They also have one of the most minimal effects on your score, comparatively speaking. According to FICO, New Credit, which includes inquiries, only accounts for 10% of your credit score. The remainder of the score is determined by:

  • Payment History – 35%
  • Amounts Owed – 30%
  • Length of Credit History – 15%
  • Credit Mix – 10%

Also, your credit report and score are only one aspect of how lenders make decisions about whether to extend credit. Lenders also consider your income, your length of employment, the amount you’re trying to borrow, the type of credit you’re requesting and other factors to determine your creditworthiness and interest rate. Still, it’s important to stay on top of your credit report to ensure the information being reported is accurate, and to request the removal of any inaccurate information. Although you can’t request removal of legitimate inquiries, you can dispute fraudulent inquiries to protect your score. By limiting hard inquiries, you can reduce unnecessary credit score reductions  and have access to credit when you need it.

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