Does pulling credit lower your score?

Does Pulling Credit Lower Your Score?

Understanding Credit Inquiries

Credit inquiries are a record of when someone requests to view your credit report. They are used by lenders and creditors to assess your creditworthiness when you apply for a loan or credit card. There are two main types of credit inquiries:

• Hard inquiries: These inquiries occur when a lender or creditor pulls your credit report to make a lending decision. Hard inquiries can potentially lower your credit score.
• Soft inquiries: These inquiries occur when you check your own credit score or when your credit report is reviewed for non-lending purposes, such as for job applications or background checks. Soft inquiries do not affect your credit score.

Impact of Hard Inquiries on Credit Score

Hard inquiries can temporarily lower your credit score by a few points. This is because lenders view multiple hard inquiries in a short period as a sign that you are aggressively seeking new credit, which can indicate financial instability. The impact of hard inquiries on your credit score typically diminishes over time, usually within 12 months.

Factors Affecting Credit Score Impact

The impact of hard inquiries on your credit score depends on several factors, including:

• Number of hard inquiries: The more hard inquiries you have in a short period, the greater the potential impact on your score.
• Time since inquiries: Hard inquiries have a smaller impact on your score as they age.
• Your overall credit history: A good credit history with low credit utilization and high payment history can mitigate the impact of hard inquiries.

Minimizing the Impact of Hard Inquiries

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

• Space out your credit applications: Avoid applying for multiple loans or credit cards within a short timeframe.
• Consider prequalification: Pre-qualifying for a loan before applying can help you understand your loan options without triggering a hard inquiry.
• Explore alternative financing options: Consider using a credit union or peer-to-peer lending platform that may be less reliant on hard inquiries.

Conclusion

Pulling credit can lower your score if it involves a hard inquiry. However, the impact is usually temporary and can be minimized by managing your credit inquiries wisely. By limiting the number of hard inquiries and spacing them out over time, you can protect your credit score and maintain access to favorable credit terms.