You’ve found the car you want, or your dream home, or you’re finally ready to consolidate that credit card debt. Then a worry sets in: if I apply for a loan, will it hurt my credit score?
The short answer is a little, and usually not for long. For most people, a single loan application lowers their FICO score by fewer than 5 points, and the effect fades within a year. Knowing how credit checks work can help you apply with confidence, shop for the best rate and avoid the mistakes that do cause damage.
Hard Inquiries vs. Soft Inquiries: What’s the Difference?
Each time someone checks your credit, it’s recorded as an inquiry. There are two kinds, and only one of them affects your score.
| Soft inquiry | Hard inquiry | |
| When it happens | You check your own credit, you get a pre-screened offer, or an existing lender reviews your account | You apply for a loan, a credit card or another new line of credit |
| Your permission needed? | Not always | Yes. You authorize it when you apply. |
| Affects your score? | No | Yes, usually by a few points |
| Visible to lenders? | No | Yes |
The takeaway: Checking your own credit never hurts your score, so check it as often as you like. You can also get free reports from all three credit bureaus at AnnualCreditReport.com.
How Much Does a Loan Application Affect Your Credit?
When you apply for a loan, the lender usually runs a hard inquiry. Here’s what that means for your score:
- The impact is small. According to myFICO, for most people one additional hard inquiry lowers their FICO Score by less than five points.
- It’s temporary. Hard inquiries can stay on your credit report for up to two years, but FICO scores only count them for the first 12 months.
- It’s a small part of the picture. “New credit,” which includes inquiries, makes up about 10% of your FICO Score. Paying on time and keeping balances low matter much more.
Lenders look at inquiries because opening several new accounts in a short time can signal financial stress. One application for a loan you need doesn’t send that signal.
Rate Shopping: How to Compare Loans Without Hurting Your Score
Many people worry that applying with several lenders will mean several hits to their credit. For the biggest loans, credit scoring models plan for this.
When you shop for a mortgage, auto loan or student loan, scoring models count several inquiries for the same kind of loan as one inquiry, as long as they all fall within a set window:
- Newer FICO Score versions: a 45-day window
- Older FICO Score versions: a 14-day window
- VantageScore: a 14-day rolling window for mortgage and auto loan inquiries
FICO Scores also ignore mortgage, auto and student loan inquiries made in the 30 days before your score is calculated, so recent rate shopping doesn’t count against you right away.
Pro tip: Lenders may use different scoring versions, so the safest plan is to do all your rate shopping within 14 days.
Important! Credit cards don’t get this treatment. Applying for several credit cards in a short time counts as several separate inquiries, and that can add up.
Pre-Qualification vs. Pre-Approval
Before you formally apply, you’ll often see two terms:
- Pre-qualification is usually a quick estimate of what you might qualify for, based on information you provide. It often uses a soft inquiry or no credit check at all.
- Pre-approval is a closer look at your finances and usually includes a hard inquiry. It carries more weight, especially when you’re making an offer on a home.
Terms vary by lender, so ask: “Will this be a hard or soft credit check?” A good lender will tell you clearly.
Why You Shouldn’t Be Afraid to Apply When You Need Financing
A few points on your credit score is a small price for financing that fits your life. In many cases, not applying costs more. You might:
- Keep paying a high interest rate on credit cards when a lower-rate loan could save you money
- Keep driving an unreliable car that keeps costing you in repairs
- Miss out on that perfect house or another great opportunity while you wait
And over time, a loan you repay on time can help your credit, because payment history is the biggest factor in your score.
What does hurt your credit:
- Applying for lots of different credit cards or loans in a short time
- Missing payments or paying late
- Borrowing more than you can comfortably repay
How to Protect Your Credit When Applying for a Loan
- Check your credit reports first. Look for mistakes and dispute them before you apply.
- Apply only for what you need. Be clear on the amount and the type of loan.
- Rate shop quickly. Keep all your applications for the same type of loan within about 14 days of each other.
- Avoid opening other new credit right before a big loan, like a new credit card before a mortgage.
- Use a calculator to plan your payment. CLCU’s financial calculators help you see what fits your budget.
- Ask questions. Talk to your lender about which type of credit check they use and what you’re likely to qualify for.
Frequently Asked Questions
How many points does a hard inquiry take off my credit score? For most people, it’s less than five points on a FICO Score, and the effect fades over 12 months.
How long does a hard inquiry stay on my credit report? Up to two years, but FICO Scores only count it for the first 12 months.
Does checking my own credit score lower it? No. Checking your own credit is a soft inquiry and never affects your score.
Will applying with several lenders hurt my credit? Not if you’re shopping for a mortgage, auto loan or student loan. Applications for the same kind of loan made within a short window, 14 to 45 days depending on the scoring model, are counted as one inquiry. Credit card applications are counted separately.
Ready to Apply? We’re Here to Help
At Calhoun Liberty Credit Union, we’re member-owned, so our goal is to find you a loan that fits your budget, not to sell you more than you need. We offer loans with competitive rates and flexible repayment terms, plus mortgages, home equity lines of credit, and construction and land loans for members in 59 Florida counties.
Have questions about how an application will affect your credit? Call our team at (850) 674-4527, or apply for a loan online.
Not a member yet? Explore our checking and savings accounts and join online in minutes.
