How much does your credit drop when you pull it?

Impact of Credit Inquiries on Credit Scores

When you apply for a loan or credit card, the lender will typically perform a credit inquiry to assess your creditworthiness. This inquiry involves accessing your credit report from one or more credit bureaus. While a credit inquiry is not an inherently negative action, it can temporarily affect your credit score.

Typical Impact of a Credit Inquiry

Generally, a credit inquiry from a lender results in a slight dip in your credit score. The impact is usually minimal, with most individuals experiencing a drop of no more than five points. However, the exact impact can vary depending on your overall credit health.

Factors Influencing the Impact of a Credit Inquiry

Your existing credit score plays a significant role in how a credit inquiry affects your score. Individuals with excellent credit scores may experience a smaller impact compared to those with lower credit scores. This is because a single credit inquiry has less significance in the context of a strong credit history.

Additionally, the type of credit inquiry can also influence its impact. Hard inquiries, which occur when a lender checks your credit in response to a credit application, tend to have a slightly greater impact than soft inquiries, which are typically performed for promotional purposes or by employers.

Managing the Impact of Credit Inquiries

To minimize the potential impact of credit inquiries on your credit score, you should limit applying for multiple loans or credit cards within a short period of time. This can create a pattern of credit-seeking behavior, which may raise red flags for lenders.

If you need to apply for multiple loans or credit cards, try to space out your applications over several months. This will give your credit score time to recover from the initial inquiries.

Conclusion

While credit inquiries can temporarily affect your credit score, the impact is typically minor and short-lived. By managing your credit inquiries prudently, you can minimize any negative effects on your creditworthiness. Remember to maintain a good payment history and overall credit health, as these factors have a more significant impact on your credit score than credit inquiries alone.