Does 2 hard inquiries affect credit score?

Multiple Hard Inquiries: Their Impact on Credit Scores

A hard credit inquiry occurs when a lender requests your credit report to evaluate your creditworthiness for a loan or credit card application. While a single hard inquiry can temporarily lower your credit score by a few points, multiple inquiries in a short period can have a more significant impact.

Consequences of Multiple Hard Inquiries

Each hard credit inquiry is recorded on your credit report and remains visible to lenders for two years. The Fair Isaac Corporation (FICO), a leading credit scoring company, factors in multiple hard inquiries as a negative mark against your score. This is because multiple inquiries within a short period (typically within 30-45 days) suggest that you may be applying for excessive credit, which is seen as a risk factor by lenders.

Multiple hard inquiries can:

• Lower your credit score by 5-10 points or more.
• Make it more difficult to qualify for new credit or loans.
• Result in higher interest rates or less favorable loan terms.

Rate Shopping vs. Multiple Inquiries

It’s important to distinguish between rate shopping and multiple inquiries. Rate shopping, which involves obtaining quotes from multiple lenders without actually applying for credit, does not typically lead to hard inquiries. However, if you actually apply for multiple loans or credit cards within a short period, each application will result in a hard inquiry.

Minimizing the Impact of Hard Inquiries

To minimize the impact of hard inquiries on your credit score, consider the following tips:

• Space out your applications: Avoid applying for multiple loans or credit cards within a short period.
• Shop for rates first: Get pre-approved for a loan or credit card before formally applying.
• Explain inquiries to lenders: If you have multiple hard inquiries within a short period due to unusual circumstances, explain the situation to lenders.
• Build a strong credit history: Maintaining a long and consistent history of on-time payments and low credit utilization can help offset the impact of hard inquiries.

Conclusion

Multiple hard credit inquiries can significantly affect your credit score, potentially making it more difficult to qualify for loans or credit cards and resulting in higher interest rates. By understanding the consequences of multiple inquiries and taking steps to minimize their impact, you can protect your credit score and ensure your financial stability.