When it comes to your credit score, credit inquiries do play a role, but the impact they have depends on the type of inquiry and how often they happen. There are two main types of credit inquiries: hard inquiries and soft inquiries.
1. Hard Inquiries – These happen when you apply for credit, like a credit card, loan or mortgage and the lender or creditor checks your credit report. Each hard inquiry can cause a temporary decrease in your credit score by a few points (typically around 5-10 points). However, this impact is short term and usually fades away within a few months. It’s worth noting that having multiple hard inquiries in a short span of time might indicate higher risk to potential lenders and could have a greater impact on your credit score if you have limited credit history.
2. Soft Inquiries – These occur when either you or someone who isn’t lending related checks your credit report. Soft inquiries don’t affect your credit score and aren’t visible to other lenders. Examples of soft inquiries include checking your own credit report, receiving pre-approval offers or undergoing background checks by employers.
It’s important to be cautious when you have several credit checks in a short period of time. This can give the impression that you are aggressively seeking credit, which may be seen as a sign of financial instability. If you’re shopping around for a specific type of credit, such as a mortgage or auto loan, multiple inquiries for the same purpose within a short timeframe (usually 14-45 days, depending on the credit scoring model) are typically treated as one inquiry to minimize their impact on your credit score.
To summarize, although credit inquiries can temporarily affect your credit score, demonstrating responsible credit behavior, making timely payments and maintaining a good credit history will have a greater and more positive impact on your overall creditworthiness in the long run.