Six hard inquiries on your credit report negatively impact your credit score as well as your prospects of getting approved for loans with great rates.
The good news is that only the hard inquiries from the last 12 months impact your FICO scores even though inquiries take two years before they fall off your credit report.
If you’re shopping around for mortgages, auto loans, or private student loans, the credit inquiries for the same type of loan within 14 days will be treated as a single hard inquiry.
💡 Note: According to myFICO, people with at least six hard inquiries are 8 times more likely to declare bankruptcy than people with no inquiries on their reports. This is why it’s best to avoid getting six hard inquiries in 12 months.
How Do Hard Credit Inquiries Affect Credit Scores?
In general, one additional credit inquiry results in a five-point reduction in your FICO Score. Credit inquiries fall under the New Credit Category which accounts for 10% of your FICO score.
As mentioned above, the impact of credit inquiries for mortgages, student loans, and auto loans is mitigated since redundant inquiries for these loans are eliminated from your credit report.
Shopping around for credit cards or personal loans, however, results in a hard inquiry per application.
How to Avoid Too Many Hard Inquiries
To reduce the number of hard inquiries on your credit report, make sure your applications for home and auto loans are grouped in a two-week period. This will ensure that you only get one hard inquiry per loan type.
For personal loans and credit cards, you can rely on preapprovals when shopping around since these are usually done using soft credit checks.
Here are the credit card pre-approval pages of the top financial institutions in the US:
- Chase Pre-Approved Credit Cards
- Wells Fargo Pre-qualified Credit Card Offers
- Citi Pre-qualified Credit Cards
- Capital One Pre-approved Credit Card Offers
How To Fix Excessive Hard Credit Inquiries
It takes 12 months before a hard inquiry stops impacting your credit score and it takes 24 months before it’s removed from your credit report.
You can, however, minimize the number of inquiries you’ll get in the future by grouping your home and auto loan applications. As well as leveraging pre-approved offers.
You can also reduce the number of rejected loan applications by building your credit with an app like Cushion. Build your credit score by paying your bills and Buy Now, Pay Later payments with the Cushion Virtual Card.
Related article: What Is a Hard Inquiry?
