How Credit Inquiries Affect Your Score

NEW YORK (MainStreet) — Are credit inquiries sinking your credit score? They might be.

While there are a number of factors involved – “hard” versus “soft” inquiries are at the top of that list – not every inquiry hurts. But those that do can hurt pretty bad.

First, let’s define “credit inquiry.” Anyone who examines your credit, for whatever reason, is conducting a credit inquiry. Using credit industry averages, inquiries only comprise about 10% or less of a person's credit score. But such inquiries aren't alike, and it really depends on what the inquirer is looking for.

To understand what an inquiry might turn up, let’s compare the hard versus soft credit inquiry.

Hard credit inquiry (“below the line” inquiry)

This is any attempt on your part to acquire financing that could potentially increase your debt. A mortgage for a new home, a loan to buy a new car, or a new application for a credit card would result in a hard credit inquiry. That’s because any financial move toward credit that could impact your credit score – good or bad – means you’re a candidate for a hard credit inquiry. So even an apartment rental, which results in a monthly financial payment, is considered a hard one and could impact your credit score.

Soft credit inquiry (“above the line” inquiry)

Soft inquiries usually don’t lead to any impact on credit. If you’re looking to open a bank account or apply for a new job, you may see your credit officially reviewed by the bank or your potential employer. Also, if you check your own credit report (many do via, a credit report that is free to Americans once every year) it will be considered a soft inquiry. Those shouldn’t lead to any negative impact on your credit score.