Experian, TransUnion, and Equifax use what is known as the FICO credit score- which is a number that ranges from a low of 300 to a high of 850. When you have a high credit score, you are better able to qualify for great interest rates and limits on credit cards and loans. In order to keep your good credit score range, you must understand exactly what a “hard inquiry” is and how it can have an impact on your score.
When you first apply for credit, the lender is going to pull your credit report. This places an inquiry on your report. Since it was done as a result of you applying for credit, it’s considered a “hard” hit. This is much different than a “soft” hit- which is done when you check your own credit. Sometimes, companies will do what is called a “soft” hit on your credit when you’re looking into getting a loan as well. A “soft” hit will not have any effect on your score.
While it’s true that a “hard” hit will definitely drop your score, one won’t do a whole lot of damage. However, when you have several “hard’ hits from several creditors in a short period of time, it could cause your score to drop. The credit score companies consider it “risky” when you’re applying for lots of credit at one time. If you’re taking time to compare rates, such as when you’re applying for an auto/mortgage loan, that’s considered rate shopping. This means that multiple hits are not going to count against you- as long as they’re done close to each other.
Keep in mind that when a creditor checks your report, leaving a “hard” hit- it will stay on your report for a period of 2 years. However, it will only have an impact on your score during the first year. However, any time you apply for credit during those 2 years, the creditor will see the “hard” hits. These inquiries will show which creditors you have recently applied and which credit products you have applied for as well.