How many hard inquiries are too many?

When you apply for a new loan, credit card or line of credit, lenders will typically conduct a credit check, also known as a credit inquiry. 

“These inquiries will impact your credit score,” the Consumer Financial Protection Bureau (CFPB) says, “because most credit scoring models look at how recently and how frequently you apply for credit.”

What you’ll learn:

• Hard credit checks, or hard inquiries, happen when you apply for new credit cards, loans and lines of credit.

• The more hard inquiries you have, especially in a short period of time, the more likely you are to see a change in your credit scores.

• Applying only for the loans and credit you need can help minimize the impact that hard credit inquiries have on your credit scores.

• You can use CreditWise from Capital One to better understand how hard inquiries could affect your credit.

Before you get into how credit inquiries might affect your credit, it’s important to know that there are two different kinds of credit inquiries. 

• Hard inquiries are used as part of credit reviews to determine a potential borrower’s creditworthiness. They have an effect on people’s credit scores.

• Soft inquiries are simple reviews of your credit file and existing accounts that don’t impact your credit scores.

According to credit-scoring company FICO®, a hard inquiry can cause your credit scores to drop—usually by just a few points. Hard inquiries can stay on your credit reports for up to two years. But they might only affect your scores for a year.

Why would a hard credit inquiry cause a drop in credit scores? As the CFPB explains, credit-scoring models generally look at how recently and how often you’ve applied for credit. A single hard inquiry may have a relatively minor impact on your scores. But multiple hard inquiries, especially multiple hard inquiries over a short period of time, could have more of an impact.

Hard inquiries can also have more of an impact on your scores if you have few accounts or a short credit history, according to FICO.

Keep in mind that credit-scoring companies use different formulas, or models, to calculate credit scores. And there are many different credit scores and scoring models. Some credit scores even use different ranges. That means people may have more than one score out there. As a result, a hard inquiry’s impact can vary depending on the credit-scoring company and model used to calculate a score.

It depends on the type of credit you’re applying for. Typically, each application triggers a hard inquiry. That’s how credit card applications work, for example. That means applying for multiple credit cards over a short period of time will lead to multiple hard inquiries. And that could hurt your credit scores more than a single hard inquiry might.

But some loan applications work a little differently. Shopping for auto, student or home financing within a short time frame—usually 14 to 45 days—could be treated as just a single hard inquiry. And that could have less of an impact on your credit scores than multiple hard inquiries could have over a short period of time.

It’s helpful to make sure if you’re considering applying for new loans. But FICO says “If you need a loan, do your rate shopping within a focused period such as 30 days.”

Hard inquiries can impact your credit. But rate shopping can help you minimize their impact by potentially rolling all hard inquiries within a set time into a single hard inquiry as far as your credit score is concerned. But there are other ways to manage the impact of hard inquiries too. Here are a few things you could try:

• Check whether you’re pre-approved or pre-qualified. Before you apply for credit, pre-approval or pre-qualification could help you compare options and find the right fit—without triggering a hard inquiry.

• Apply only for credit you need. By only applying for the credit you need, you’ll reduce the number of inquiries on your credit report.

• Keep your credit utilization lower. Your credit utilization ratio refers to the total amount of available credit you’re using at any given time. Keeping your utilization low, ideally below 30%, may help bolster your credit health and minimize the impact of hard inquiries. 

Monitoring your credit can help you stay on top of hard inquiries and other factors that impact your credit. 

A tool like CreditWise can help. With CreditWise, you can stay on top of your VantageScore® 3.0 credit score and TransUnion credit report without hurting your score. It’s free for everyone, even if you’re not a Capital One cardholder. And with CreditWise’s Credit Simulator, you can explore the potential impact new inquiries might have before you apply.

You can also get free copies of your credit reports from each of the three major credit bureaus by visiting AnnualCreditReport.com.

Applying for new credit typically results in a hard inquiry. But if you only apply for the credit you need and maintain other positive credit habits, you can minimize the effect a hard inquiry has on your credit.

Getting pre-approved for a credit card before submitting an application can show you card offers you might be qualified for. And checking with Capital One won’t hurt your credit scores, because pre-approval uses a soft inquiry.