Do Credit Cards Do Hard Inquiries When Applying?

Understanding how financial institutions review your credit history is important when making significant financial decisions, such as applying for new credit. When you seek new credit, lenders typically perform a check of your credit report to assess your financial behavior and determine your eligibility. This process helps them understand your payment history, existing debts, and overall credit management.

Hard Inquiries and Credit Card Applications

A hard inquiry, also known as a hard pull or hard credit check, occurs when a lender formally requests your full credit report from a credit bureau. This type of inquiry is typically triggered when you submit an application for new credit, such as a credit card, a loan, or a mortgage.

Lenders conduct hard inquiries to evaluate your creditworthiness and assess the risk associated with extending credit. They obtain detailed information, including your payment history, outstanding balances, and other relevant credit accounts. This information helps them decide whether to approve your application and what terms and interest rates to offer. Companies need to get your permission before they conduct a hard credit check.

Soft Inquiries and Their Role

In contrast to hard inquiries, soft inquiries do not impact your credit score. A soft inquiry, sometimes called a soft pull or soft credit check, occurs when someone reviews your credit report without it being tied to a formal credit application. These inquiries typically provide a less detailed view of your credit history.

Soft inquiries commonly happen when you check your own credit score or credit report through a credit monitoring service. Lenders also use soft inquiries for pre-screening purposes, such as sending you pre-approved offers for credit cards or loans. Additionally, soft inquiries may occur during identity verification processes or when certain employers or landlords perform background checks.

How Inquiries Impact Your Credit Score

Only hard inquiries have the potential to affect your credit score, typically causing a small, temporary dip. A single hard inquiry might lower your credit score by a few points, often less than five. This minor impact is usually short-lived, with your score often recovering within a few months if you continue to manage your credit responsibly.

While a hard inquiry remains on your credit report for up to two years, its influence on your score significantly diminishes after about 12 months. Multiple hard inquiries within a short period, such as a few weeks, can have a more noticeable, though still temporary, effect. This is because several inquiries in a brief timeframe might signal to lenders that you are actively seeking a significant amount of new credit, which could be perceived as an increased risk.

Approaching Credit Card Applications

When considering credit card applications, it is beneficial to take strategic steps to manage potential hard inquiries. Before applying, obtain a copy of your own credit report and score to understand your current credit standing. This allows you to gauge your eligibility for specific credit cards and identify any potential issues. You can typically access your credit report for free annually.

Utilize pre-qualification or pre-approval tools offered by many credit card issuers. These tools usually involve a soft inquiry, which does not affect your credit score, and can provide an indication of your likelihood of approval. By using these options, you can narrow down your choices to cards for which you have a reasonable chance of acceptance, potentially avoiding unnecessary hard inquiries. Focus your applications on credit cards that align with your financial needs and for which you are a strong candidate.