Credit checks are important to many areas of your financial life, so it’s necessary to understand what will affect your credit and how. The general consensus is that hard inquiries have a negative impact on your credit score, but it may not be affecting your score as much as you think.
Hard vs. Soft Pull
There are two types of credit inquiries: hard and soft. A hard inquiry occurs when you authorize someone else to pull your credit to determine if you are eligible to receive a loan. Student loans, mortgages, credit cards and personal loans all require a hard pull on your credit so the lender can review your full credit report.
Soft inquiries occur when you or someone else views your credit report to estimate what type of services you are eligible for. Lenders will often use a soft pull if they need a snapshot of your credit for some reason other than underwriting a loan, like when you receive a preapproved offer in the mail.
How Will a Hard Pull Affect my Credit?
Hard inquiries can impact your credit score, but it’s generally a small change that won’t affect your score for long. FICO considers multiple inquiries of the same type made within 14 to 45 days as one inquiry. For example, if you apply to refinance your mortgage with multiple lenders and each lender does a hard pull of your credit, it will only count as one hard pull, so the effect on your credit score is minimal. However, if you are applying for a mortgage and a car with multiple lenders, you will see your score change more. Because these inquiries are for two different types of loans, your score will drop depending on your unique credit history and the number of pulls.
In general, it’s good to only focus on one type of loan at a time. Multiple hard inquiries of different types (student loan, auto loan, mortgage) will most likely lower your score, so make sure you spread these out as much as possible to minimize the impact. Hard inquiries remain visible on your report for two years, but only impact your FICO score for one year.
Checking Your Credit
It’s good to keep tabs on your score so you can quickly find discrepancies or fraud on your account, and you can check your credit as often as you like without affecting your score. When you check your own credit score, an inquiry will be added to your report that will only be visible to you.
We use a FICO score powered by TransUnion for our underwriting purposes. The impact of a hard pull on your FICO score depends on several factors: the amount of money owed, payment history, how long the account has been open, the types of credit used and recent activity. A hard inquiry will affect you more if you have a short credit history and few accounts open. One hard inquiry will generally only knock a few points off, if any, of your score.
Before you apply to refinance your student loans, you can see what your rate is without a soft or hard credit pull with our Find My Rate tool.