How Many Credit Inquiries Are Too Many?
5 Min Read | Last updated: October 14, 2024
While there’s no such thing as too many hard credit inquiries, each hard inquiry can drop a credit score by a few points – and make the borrower appear riskier to lenders.
At-A-Glance
- Unlike soft inquiries, hard credit inquiries may temporarily ding your credit score.
- There’s no such thing as “too many” hard credit inquiries, but multiple applications for new credit accounts within a short time frame may point to a risky borrower.
- Rate shopping for a particular loan, however, may be treated as a single inquiry and have minimal impact on your creditworthiness.
Open your mailbox — or inbox — on any given day and you might find at least one lending offer from a credit card company, bank, or car dealership promising savings, low APRs, or refinancing deals. Some may be well worth pursuing, but before filling out the paperwork, consider this: When you formally apply for a loan or credit, lenders will check your credit history with a “hard inquiry” — and every hard inquiry will usually cause a dip in your credit score.1
How many hard credit inquiries are too many? There’s no concrete answer. Depending on the situation, the more hard inquiries conducted for multiple lines of credit within a brief time window, the greater the impact on the applicant’s credit score, and the more likely a lender will deem the borrower too risky. The good news is, if the hard inquiries were incurred because you’re rate shopping to find the best loan terms, there are ways to minimize the impact.
What Is a Hard Inquiry?
Whenever you or a legally authorized company, person, or organization obtains your credit information, it creates entries on your credit report known as inquiries. Those inquiries fall into two categories: soft inquiries and hard inquiries.
A hard inquiry occurs when you formally apply for credit, be it a new credit card, an auto loan, or a mortgage. In some cases, signing up for services like a cellphone account or utility may also trigger a hard inquiry. In these cases, you’re giving creditors the green light to contact one or more of the three national consumer credit bureaus — Experian, TransUnion, or Equifax — to access your credit report for details about your debts and payment history before determining whether to approve your application.1 Your credit history may also play a role in finalizing loan terms and interest rates. A hard inquiry may cause your credit score to drop temporarily by a few points.1
A soft inquiry occurs when you check your own credit report or when a business checks it without you requesting credit. For example, you might see a soft inquiry on your credit report after a credit card company sends you an unsolicited prequalification offer. Because a soft inquiry isn’t a determining factor in whether a creditor actually lends you money, it has no influence on your credit score.1 However, if and when you fill out the application for that prequalified card, a hard inquiry will ensue.
How Do Hard Inquiries Impact Your Credit Score?
Though the effects are minimal, hard inquiries do impact your credit score. For most people, one hard inquiry will take less than five points off their FICO score;1. However, FICO also notes that individuals with few accounts or a short credit history may experience a greater negative impact to their credit scores.2
Although hard inquiries account for just 10% of your total FICO score, it’s worth noting that these inquiries stay on your credit report for two years. Fortunately, only hard inquiries from the last 12 months are factored into FICO scores.3
How Many Hard Credit Inquiries Are Too Many?
Technically, there’s no such thing as “too many” hard credit inquiries. But several hard inquiries for multiple lines of credit occurring in a short time period might work against you. Specifically, applying for a lot of new credit lines within a short time frame might be seen as a red flag to lenders because it can suggest that you’d be a higher credit risk. According to FICO, studies show that people with six or more hard inquiries on their credit reports can be up to eight times as likely to declare bankruptcy, compared to those with no inquiries.3
So, if you are in need of credit or several major purchases are looming on the horizon, logic may dictate that you shouldn’t act on several of those aforementioned offers for new credit cards and loans in one fell swoop. If you’re looking to open up multiple lines of credit, it may be better to pace yourself, so you might be able to demonstrate your ability to handle each form of debt before acquiring a new one. Otherwise, lenders may identify you as a high-risk borrower. Waiting may also give your score a chance to rebound after the last hard inquiry and ensure that your next application reflects the best picture of your creditworthiness.
Why Rate Shopping Might Minimize the Impact of Hard Credit Inquiries
If you’re in the market for a loan and want to find the best interest rate, you’ll have to apply for quotes from multiple lenders — each of which may trigger a new hard credit inquiry. The good news is that these inquiries may be treated as a single hard inquiry as long as they’re all made within a short time span, usually 14 to 45 days depending on the credit scoring model.1 Both FICO and VantageScore models allow for this type of comparison shopping.4
Therefore, if you’re looking for a loan (e.g., a mortgage, auto loan, or student loan), rate shopping may have a nominal impact on your credit score, despite a cluster of multiple hard inquiries appearing on your credit report back to back. To boost your chances of a single-inquiry outcome, it’s a smart idea to conduct all rate shopping within a two-week window.1 To expedite the application process, make sure that you first gather all the necessary financial documents.
Note that this kind of bundled approach applies only to loans. Multiple credit card applications, even within a short window, may result in a greater negative impact, since each one will prompt its own hard inquiry.
The Takeaway
When you fill out a loan or credit card application, the creditor will conduct a hard credit inquiry to determine your creditworthiness. Each hard inquiry may cause your credit score to drop by a few points. There’s no such thing as “too many” hard inquiries, but multiple credit inquiries within a short window of time can suggest that you might be a risky borrower. However, that’s not the case if you’re rate shopping for a loan, which is usually regarded as a single inquiry — as long as you conduct all rate shopping within a couple of weeks.
1 “Hard Inquiry vs. Soft Inquiry: What’s the Difference?,” Experian
2 “How Do Credit Inquiries Affect Your FICO Score?,” myFICO
3 “How New Credit Impacts Your Credit Score,” myFICO
4 “Are FICO® Scores and VantageScore® Different?,” Equifax
Randi Gollin is a freelance writer and editor who has covered lifestyle and business topics for digital publications and tech and media brands.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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