Why Does a Hard Inquiry Hurt Your Credit?

Hard inquiries, or hard credit checks, hurt your credit score because it can be viewed as financially irresponsible to apply for too many loans or forms of credit. If you apply for a lot of loans and the lenders are all running credit checks you will likely see your credit score take a dip. These hard credit checks can stay on your credit report for up to two years. 

A hard inquiry is when a lender, bank, credit union, or other financial institution checks your credit to find out how trustworthy you are when you borrow money. This allows them to see your past borrowing behavior and your overall credit score. This way they’ll have a better idea of whether or not they can trust you with a new loan. If you’ve ever applied for a personal loan, auto loan, mortgage, or other types of credit products, odds are they ran a hard inquiry. 

A soft inquiry, or credit check, is when they check your credit score but it doesn’t affect your credit. This is often done by employers, individuals who want to check their own credit, and lenders who want to pre-approve a borrower to make them an offer. You may be able to view all of your soft credit checks, but they won’t stay on your report and they won’t lower your credit score. 

There are a number of things that can affect your credit score. A hard inquiry is just one of them. Below is the breakdown of other factors that affect your credit score: 

  • 35% Payment history
  • 30% Outstanding debts
  • 15% Length of credit history
  • 10% New credit
  • 10% Credit mix

These are all of the things that are considered when your credit score is calculated. So if you apply for a lot of loans, credit cards, or other financial products, that may show up on your credit report as “new credit.” This usually means that you’re struggling financially and may indicate that you’re having a difficult time staying afloat without new loans. This is why these inquiries can lower your credit score. 

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