What Happens When Your Credit is Pulled for Loans


Credit checks are reported as an “inquiry” to credit report agencies. Inquiries tell other creditors that you are considering on taking on new debt. Whenever an inquiry is made, it has a small yet negative impact on your credit score. You can’t avoid them all together as it is necessary step in applying for a mortgage or a loan and sometimes even potential employers do a credit check before they will hire you. It pays to be smart and to work around this so as a general rule, it’s best to apply for credit only when you need it.

When you apply for a credit card, a car loan or any type of loan, this results in an inquiry that will lower your credit score. If you plan on getting a mortgage anytime soon or are already in the mortgage process, you should avoid these types of credit for now.

It’s still important to know your credit score as it is an important and essential aspect of maintaining a good financial health. There are two types of inquiries that can be made on your score and here’s a take on the different types of credit pulls and how it can impact your score:

Hard inquiry. This can knock down a few points off your credit score and this is a legal inquiry to view your credit history. It includes: law enforcement agencies, prospective employers, insurance companies, creditors you have existing debt with, creditors you’d want to do business with and utility companies. You also have the right to give someone access to view your credit report should they not fall into the category mentioned. It qualifies as a hard inquiry when a lender or a business obtains a copy of your report in response to an application for credit. This means that it can show up on your credit score and can be used in part to determine your credit score. Each new hard inquiry does show up on your credit report however you do get a break if you’re shopping around for a mortgage or if you’re trying to refinance your student loans.

Soft inquiry. This means checking on your own credit. It occurs when a person or a prospective employer checks your credit as part of a background check. A lender may also do a soft inquiry as part of a pre-approval process if you’re trying to get a rate quote of a loan. You can check on your own credit as many times as you want without the risk of hurting your credit score. Actually, you should check on your credit report and credit score regularly to ensure there are no errors or any identity theft has occurred. Peeking at your own credit can also be a motivator if you’re working on paying down debt.

So, how long do inquiries stay on your credit? Inquiries on your credit remain on your credit report for 24 months or 2 years and only a hard inquiry can impact your score for the first 12 months.

For more on your credit and how to get a better score read these great articles.

What Credit Score Does Everyone Start With?
A Car Loan Can Help You Improve Your Credit Score
Raise Your Credit Score Quickly With These 5 Techniques

About the author

Join our newsletter

Subscribe to get the latest "Engineer Your Finances" content via email.

Powered by ConvertKit

ModestMoney.com Top Finance Blogs


SSCP   CAS-002   9L0-066   350-050   642-999   220-801   74-678   642-732   400-051   ICGB   c2010-652   70-413   101-400   220-902   350-080   210-260   70-246   1Z0-144   3002   AWS-SYSOPS   70-347   PEGACPBA71V1   220-901   70-534   LX0-104   070-461   HP0-S42   1Z0-061   000-105   70-486   70-177   N10-006   500-260   640-692   70-980   CISM   VCP550   70-532   200-101   000-080   PR000041   2V0-621   70-411   352-001   70-480   70-461   ICBB   000-089   70-410   350-029   1Z0-060   2V0-620   210-065   70-463   70-483   CRISC   MB6-703   1z0-808   220-802   ITILFND   1Z0-804   LX0-103   MB2-704   210-060   101   200-310   640-911   200-120   EX300   300-209   1Z0-803   350-001   400-201   9L0-012   70-488   JN0-102   640-916   70-270   100-101   MB5-705   JK0-022   350-060   300-320   1z0-434   350-018   400-101   350-030   000-106   ADM-201   300-135   300-208   EX200   PMP   NSE4   1Z0-051   c2010-657   C_TFIN52_66   300-115   70-417   9A0-385   70-243   300-075   70-487   NS0-157   MB2-707   70-533   CAP   OG0-093   M70-101   300-070   102-400   JN0-360   SY0-401   000-017   300-206   CCA-500   70-412   2V0-621D   70-178   810-403   70-462   OG0-091   1V0-601   200-355   000-104   700-501   70-346   CISSP   300-101   1Y0-201   200-125  , 200-125  , 100-105  , 100-105  , 1Z0-803  , 400-051   EX300  , CISM   100-105  , 000-106   400-201   642-732   220-902   70-410  , MB6-703   810-403   70-243  , CAS-002  , AWS-SYSOPS   70-462   70-410   2V0-621   LX0-103   70-461  , 220-902   1Z0-144   70-178   70-270   350-080  , 1Y0-201   1z0-808  , NSE4   102-400  , ADM-201   SSCP  , 200-125  , 640-911   000-104   640-692   300-320   350-060   000-089  , 000-017   1z0-808   700-501   1Z0-051  , 70-177   M70-101   300-209   70-461   3002   N10-006   VCP550   70-487   300-320  , 3002   700-501   NS0-157  , 1V0-601   CAS-002