Definition
A hard inquiry is a request for a credit report by a lender resulting from a prospective borrower’s request for credit.
Analysis
Hard inquiries occur whenever a request to receive credit results in a credit check. It usually signals a consumer’s attempt to obtain debt.
Hard inquiries are recorded on the credit report in one section. Each hard inquiry can reduce your credit score from 0 to 5 points.
The amount of decrease in a credit score depends on a number of factors. A consumer with many accounts may see very little drop, while a person with only a couple of credit accounts might see a more substantial drop in their credit score for each hard inquiry.
Hard inquiries remain on a credit report for 2 years, as do all inquiries. The impact of hard inquiries is greatest when they are less than 6 months old. Inquiries older than 1 year have little impact on credit scores, and they cease to affect scores after 2 years.
A high number of hard inquiries in a short period of time can cause credit scores to drop more rapidly. Many creditors will deny credit for an otherwise qualified applicant if they see a high number of hard inquiries within the past 6 months.
An exception is made for hard inquires resulting from attempts to finance a vehicle purchase or for mortgage loan applications. All hard inquiries related to a car loan that occur within a short period of time are grouped together and count collectively as one hard inquiry. Similarly, all mortgage loan requests in a short period of time are also counted as one hard inquiry. All credit checks still appear on the credit report, even if they are grouped and counted together.
Older risk-scoring models group car loan or mortgage loan inquiries together as long as they occurred within a 14 day window. Newer models allow up to 45 days for these inquiries to count together. This may affect an applicant depending on which scoring model a lender uses.
