Credit inquiry can drop your credit scores temporarily.  However, too many inquiries can seriously affect your VantageScore and FICO, with the latter being used by 90% of lenders.  As a result, lenders, mostly credit card issuers, can deny you future credit.

You or your financial coach can routinely check your credit scores with no negative impact because the credit agencies’ scoring formula does not penalize you for soft inquiries.

Hard Inquiry vs. Soft Inquiry

Before a financial institution approves your request for a credit card, mortgage, a personal or car loan, they will request your credit report information from one of the three major credit agencies–Experian, Equifax, and Transunion.  

That request to a credit agency is a hard inquiry meaning that too many of them can reduce your credit scores drastically, and one hard inquiry can drop your FICO scores by 3 to 5 points.  

You can also pull your credit report or grant permission to a financial coach or a credit monitor company to do so.  

The request from you or the authorized organization is a soft inquiry meaning that it does not affect your credit scores. 

Experian, Equifax, and Transunion allow credit card issuers and other financial institutions, for a fee, to review your credit profile and market their products to you.  The access is also a soft inquiry. 

Under the Fair Credit Reporting Act (FCRA), you can opt-out if you don’t want credit card companies to review your credit report and bombard you with credit card offers and other financial products.

Credit Inquiry: Buy or Refinance Your Home

Too many hard inquiries can be harmful to your credit profile.  Buying or refinancing a home often requires you to shop around for the best pricing and terms and conditions. 

To accommodate that flaw, the credit agencies count all mortgage inquiries made within 45 days as one.  So, you have to figure out where you want to live, how much home you can afford, how much you can put down, and check your credit before reaching out to a mortgage lender.  

You have 45 days to shop around for the best interest rates, points, and other fees.

Credit Inquiry:  Shopping for An Auto Loan

Similar to homebuying, shopping for an auto loan requires you to let multiple lenders pull your credit to offer the best deal. 

The credit agencies scoring formula counts all inquiring within 14 days as one single inquiry.  Because you only have 14 days, go over your finances and decide on the car you want to buy, research your trade-in value, and compare prices before shopping around the best financing.

Nowadays, you can shop for the best interest rate online and get preapproved for a loan before you set foot inside a car dealership. 

Credit Inquiry:  Credit Cards

Unlike shopping for a mortgage or a car loan, you don’t have a period to shop for the best credit card (s).  Each time you fill out a credit card application, the credit card issuer will pull your credit report and review your track record as a borrower.  

If you apply for 24 credit cards within 24 hours, you will end up with 24 hard inquiries, which will harm your credit score. 

Even with an excellent credit score, credit card issuers will flag or deny your application if you have too many hard inquiries in a short period to deter churners.

Churning is the practice of repeatedly opening and closing credit cards to earn cash, rewards points, or miles. 

The Bottom Line,

You have 14 to 45 days to shop around for the best mortgage and auto loans without hard inquiries harming your credit score because all inquiries whiting that timeframe count as one single inquiry.

Excessive hard inquiries affect your FICO score, but the effect is short-term, and they are a minor factor that contributes to your credit score.  Go ahead and apply for that new shiny credit card!