How many points does a hard search take off?

The Myth of the Credit Score Scare: How Many Points Does a Hard Inquiry Really Cost You?

We’ve all heard the whispers, the warnings, the almost mythical fear surrounding the phrase “hard credit inquiry.” It conjures images of plummeting credit scores and financial ruin. But the truth about hard inquiries is far less dramatic and much more manageable. The reality is, a hard inquiry is a normal part of managing your finances and generally doesn’t warrant the panic it often inspires.

So, let’s tackle the burning question: How many points does a hard search actually take off your credit score?

The answer, thankfully, is reassuringly small. In the vast majority of cases, a hard credit inquiry will deduct less than five points from your FICO® Score. That’s it. Less than five points. This tiny dip is usually dwarfed by other factors contributing to your creditworthiness, such as payment history, credit utilization, and the length of your credit history.

Why is this so often misunderstood? Perhaps because the term “hard inquiry” sounds intimidating. Or maybe it’s because we’re bombarded with warnings about protecting our credit scores. But understanding the context is key.

A “hard inquiry” happens when a lender checks your credit report because you’ve applied for credit, such as a loan, credit card, or mortgage. They’re essentially assessing your risk as a borrower. Soft inquiries, on the other hand, are checks made for informational purposes, like when you check your own credit report or a company pre-approves you for a credit card. Soft inquiries don’t impact your credit score.

Here’s what you need to remember about hard inquiries:

• Minimal Impact: The impact on your score is generally small, usually less than five points.
• Temporary: This impact is temporary. The hard inquiry will typically stay on your credit report for up to two years, but its influence on your score fades significantly after 12 months.
• Rate Shopping is Protected: Credit scoring models understand that you might shop around for the best interest rates. Multiple inquiries for the same type of loan (e.g., mortgage, auto loan) within a short period (usually 14-45 days) are often treated as a single inquiry, minimizing the impact on your score. This allows you to compare rates without fearing a significant score drop.
• Responsible Credit Management Matters More: Focus on the factors that have a bigger impact on your credit score: paying your bills on time, keeping your credit card balances low, and maintaining a good mix of credit accounts.

When Should You Be Cautious About Hard Inquiries?

While a single hard inquiry is unlikely to tank your credit score, multiple inquiries in a short period, especially for different types of credit, can raise a red flag for lenders. This can suggest you’re desperately seeking credit, which may indicate financial instability.

In conclusion: Don’t let the fear of hard inquiries paralyze you from making necessary financial decisions. A small, temporary dip in your score is a reasonable price to pay for securing a loan or credit card that can help you achieve your financial goals. Focus on building and maintaining a healthy credit profile through responsible borrowing habits, and a few hard inquiries won’t be a cause for concern. The key is understanding the context and focusing on the bigger picture of your overall credit health.