Credit (Definition) Check: What Does A Hard Inquiry Mean?

Whenever consumers apply for a loan or a credit card, banks usually perform an inquiry. During this process, they will request to view your credit information. While you may be wondering whether a simple inquiry can impact your credit, you first need to learn whether it's a hard or a soft inquiry. Unlike soft inquiries, hard inquiries can affect your credit score. 

What Is a Hard Inquiry?
A hard inquiry is when someone accesses the credit file of a consumer to evaluate an application for a loan or credit. Financial institutions such as mortgage lenders perform hard inquires to ensure consumers are able to pay back their debts. 

When Can People Expect a Hard Inquiry?
There are various scenarios when you can anticipate a hard inquiry showing up on your credit report. Applying for loans, such as for a car loan or a student loan, will usually result in a hard inquiry. Another likely scenario is if you try to process a request for a credit card. Finally, banks will often pull a credit file to pre-qualify you for a mortgage. 

How Do I Know When There Has Been a Hard Inquiry?
When looking over credit reports from a credit reporting bureau, you may see the name of the organization making the inquiry. Usually, the name of the organization, such as a lending firm, will appear on the credit report as well as the date of the inquiry.

Will a Hard Inquiry Affect My Credit Score?
As more potential lenders look at a consumer's credit score using hard inquires,  his or her score may drop. Experian notes that having too many hard inquiries within a six-month period may result in a lower credit rating. This is a common occurrence when you apply for pre-qualification with multiple mortgage lenders and the credit checks that are requested add up.

How Much Will a Hard Inquiry Impact My Credit Score?
​The number of total hard inquires can also determine how much your current credit rating will drop. One inquiry can reduce a credit score by one to five points, and credit bureaus can calculate the effect of hard inquiries using the VantageScore credit scoring model. Not only does the amount of hard inquiries matter, but the length of a consumer's credit history also plays a significant role in how inquiries may determine credit scores. Consumers who have short credit histories may find themselves being impacted more than if they had a longer history, as inquiries can result in more points lost.