What Is a Hard Inquiry?

Your credit reports hold some important information about your financial habits and how responsibly you manage debt. If you're applying for loans or credit cards, it's not unusual for lenders to perform a hard inquiry of your credit reports. 

A hard inquiry is a formal request to view your credit history by someone you authorize. It can’t be made without your permission. One reason for this is that whenever there's a new hard pull of your credit, it can show up on your credit reports and negatively affect your credit score.

How a hard inquiry works

Once you’ve given a lender the green light to check your credit, it will be able to pull your credit reports. There are three major credit bureaus that furnish consumer credit reports in the U.S.: Equifax, Experian, and TransUnion. 

Your credit reports contain important information about your debts, including:

• Payment history.
• Credit utilization.
• Types of credit used.
• Age of credit accounts.
• Inquiries for new credit.

Lenders use hard inquiries to see what's in your credit report and assess what kind of risk you might pose as a borrower. 

For example, if your credit reports reveal numerous late or missed payments, it could be a red flag to lenders. On the other hand, a lengthy history of on-time payments indicates that you're likely to pay back what you borrow in the future. 

How does a hard inquiry affect your credit score? 

Credit scores are three-digit numbers that reflect your debt habits based on the information in your credit reports. Hard inquiries are one of the factors used to calculate credit scores. 

How much weight inquiries have in credit scoring depends on the model that's being used. FICO scores, which are the most widely used credit scores among lenders, are based on these five factors:

• Payment history: 35% of your score.
• Amounts owed (credit utilization): 30% of your score.
• Length of credit history: 15% of your score.
• Credit mix: 10% of your score.
• New credit (credit inquiries): 10% of your score.

Compared with payment history or credit utilization, hard inquiries have a much smaller impact on your credit scores. However, the impact is not zero. Each new inquiry can cost you a few credit score points, usually less than five. 

It's worth noting that the FICO credit scoring model doesn't penalize you for loan-rate shopping. You can apply for multiple loans of the same type (i.e., mortgage, car loan, etc.) in a short time span and have each inquiry treated as one. This rule doesn't apply to credit cards, however. 

How long does a hard inquiry stay on my credit report?

Hard inquiries can affect your FICO score calculations for 12 months and remain on your credit reports for two years. How much of a score drop you see from inquiries and how long the impact lasts depends on your financial habits. 

If you acquire a new credit card and consistently pay on time while keeping your balance low, you might be able to recover any lost points fairly quickly. On the other hand, if you open three new credit cards within a space of two months and run up high balances on all of them, you're likely going to have a harder time getting those points back. 

Limiting how often you apply for new credit can minimize the impact of hard inquiries. It's also a good idea to hold off on applying for any new credit cards or loans ahead of getting a mortgage or car loan. In these instances it's to your advantage to keep your score as high as possible, so that you have the best chance of qualifying for a low interest rate. 

Soft vs. hard inquiry

A soft inquiry is the opposite of a hard inquiry in terms of how it works and the impact on your credit scores. 

Soft inquiries happen when you or someone else views your credit without doing a formal pull of your credit reports. For example, checking your own reports monthly using a credit monitoring service such as Experian or myFICO is a type of soft inquiry. 

Other examples of soft inquiries include:

• Prescreened offers for credit.
• Landlord credit checks (if you're renting an apartment).
• Employment credit checks.

Unlike hard inquiries, soft inquiries carry no weight in credit scoring. They can stay on your credit reports for two years, but they're only visible to you, not lenders. That means you can check your credit reports as often as you like without worrying about costing yourself credit score points.

Which financial products will require a hard inquiry?

Hard inquiries are usually the rule, rather than the exception, when you're borrowing money. Again, that's because lenders need to know where to rate you on the risk scale based on what's in your credit report. Here are some of the financial products that typically require a hard credit pull. 

Personal loans

A personal loan is money you borrow for personal reasons. For example, you might get a personal loan to consolidate credit card debt, cover medical bills, or put a new roof on your home. 

You might be able to compare personal loan rates without impacting credit scores if the lender only does a soft inquiry. Once you're ready to submit a loan application, however, a hard inquiry is usually standard. 

Student loan refinancing

Refinancing student loans means getting a new loan to pay off existing student debt. You might refinance if you are hoping to lower your interest rate or monthly payment or need different loan terms. 

Most private student loan lenders let you check your rates without affecting your credit, but you'll need to agree to a hard credit inquiry to apply. Laurel Road is a possibility for refinancing student loans. There's no hard credit pull required to check rates, and you can get quotes in just a few minutes. Opening a Laurel Road checking account and linking it to your refinance loan can help you unlock special discounts, and you can also get a cash bonus with eligible direct deposits.

If you're trying to streamline federal student loan debt, be sure to look into consolidation through the U.S. Department of Education first. Consolidating federal loans won't reduce your interest rates, but it can leave you with just one monthly payment to make. There's no credit check required. And you retain the protections and loan forgiveness opportunities included in the federal student loan program.

Car loan refinancing

If you're refinancing an existing car loan or applying for one for the first time, it's standard to expect a hard inquiry. An exception might be if you're choosing "buy here, pay here" financing, but that can be one of the most expensive options for car loans. When you need to compare refinance quotes, you may want to start with a company that offers rates without a hard credit check first. 

RefiJet, for example, offers refinancing rates without affecting credit. Should you decide to move ahead with an application, you'll need to agree to a hard pull. You might consider RefiJet if you'd like to remove a cosigner, change loan terms, or get a break from payments. For the first three months after refinancing, you'll have no payment to make.  

When comparing refinance options for an auto loan, also remember to check fees and terms. Vehicle refinancing could lower your rate or monthly payments, but if you're moving into a longer loan term, your net savings might be minimal. 

Mortgage loans

Reputable mortgage lenders require hard credit checks as part of the application process. This is true whether you're applying for a purchase loan to buy a home or refinancing an existing mortgage. 

Mortgage lenders will check your credit scores as well as your credit reports. What typically happens is that lenders pull your credit scores from each of the three credit bureaus, then use the median score for approval decisions. 

For this reason it's a good idea to keep your credit scores as high as possible when you're planning to apply for a mortgage. You can do that by paying bills on time, reducing debt, and limiting new applications for credit. 

Credit cards

Credit cards usually require a hard pull to apply and get approved. This goes for both personal credit cards and business credit cards. 

What credit score do you need to get a credit card? It depends on the card in question. If you're applying for something like the card_name, you may need a score of 760 or higher to be approved. This card offers premium rewards, travel benefits, and a generous introductory bonus. As a general rule, the better the rewards and benefits are, the better your credit will need to be to get approved.

Other cards can require a hard inquiry but have a lower credit score threshold for approval. They include student credit cards, secured credit cards, and retail store cards. If someone else lists you as an authorized user on their credit card to help you build credit, there's no credit check requirement. 

Insurance

Purchasing insurance could result in a hard credit check if the lender uses one to assess risk. Some of the insurance products that may require a credit pull include:

• Car insurance.
• Homeowner’s insurance.
• Life insurance.
• Disability insurance.
• Long-term care insurance.

Again, the reason for a credit check is to allow the lender to assess risk. Whether you're approved for insurance and what you pay for premiums hinges largely on your overall risk profile. 

For example, if you're interested in getting life insurance, the insurance company will look at your health and overall lifestyle. A low credit score could indicate that you're irresponsible or more willing to take risks, while a higher score could suggest that you tend to play it safe. 

Fabric by Gerber Life is a top-rated option if you're looking for life insurance quotes online. You can get anywhere from $100,000 to $5 million in term life insurance at affordable rates. Terms range from 10 to 30 years, so you can choose the policy option that best fits your needs. Underwriting is automated, so there's no need to complete a medical exam to get covered. 

TIME Stamp: Know the implications of a hard inquiry before you approve one

Understanding hard credit inquiries is helpful if you're interested in improving your credit scores. As these inquiries are included in credit score calculations, it's wise to be strategic about how often you apply for new credit. Reviewing your credit reports regularly and checking for any suspicious inquiries can also help you head off potential fraud from someone else using your information to apply for loans. 

Frequently asked questions (FAQs)

What is a FICO score?

A FICO score is a credit scoring model developed by what was originally Fair, Isaac and Company. FICO scores range from 300 to 850, with 850 being considered a perfect score. According to FICO these scores are used by a majority of top lenders in credit decisions. 

What is a VantageScore?

VantageScores are credit scores that were developed as part of a joint initiative by the three major credit bureaus. Like FICO scores, VantageScores operate on a range from 300 to 850, with 850 being the highest score. However, these scores differ from FICO scores with regard to how they're calculated. 

What are the different credit score ranges?

FICO breaks credit scores into five distinct ranges. A score of 800 to 850 is considered” exceptional,” while scores ranging from 740 to 799 are in the "very good" credit range. A “good” credit score is anything between 670 and 739, while a score of 580 to 669 is “fair” credit. Anything below 580 is considered “poor” credit. 

What is a credit freeze?

A credit freeze is a security measure that allows you to block new inquiries into your reports. While a credit freeze is in place, you can still view your own credit reports, but lenders can't pull your reports in order to use them in lending decisions. You would first need to unfreeze your reports in order to apply for new credit.