Inquiries into your credit report will affect your credit score depending on the type. Looking at a credit report is called an ‘inquiry.’ There are two types of inquiries, a soft inquiry and a hard inquiry.
A soft inquiry is when you or someone you have authorized review your credit for reasons unrelated to approving you for credit. Some examples of this include:
- Educational purposes to gather insight on your financial situation
- Applying for housing, including preparing for homeownership or renting a property
- Employer conducting a background check for employment purposes
Soft inquiries do not make your score go down because you are not officially applying for any new lines of credit accounts.
A hard inquiry is when a lender checks your credit to review a new application for credit, such as:
- Applying for a credit card
- Applying for a loan
- Applying for a mortgage
A hard inquiry is reflected on your credit report for two years and may reduce your score by as much as 15 points. It typically takes 3 - 6 months of responsible credit management for a new line of credit to become established and begin helping your credit score. Avoid opening or requesting several accounts at once to show a lender that you can responsibly manage your credit and repay your debt. As long as you make your payments on time and stay within your credit limit, your credit score will bounce back from a hard inquiry.
Take your time and be patient in your journey to improving your credit. You will be able to rebuild or increase your credit at any moment with discipline and effort. Stay up-to-date with your credit by checking your credit report and credit score. Check your credit report every year to identify any fraudulent or inaccurate information.
Wondering why your credit score varies? Visit our following article to learn more: Why does my credit score vary?