Ironically, even when a credit card issuer checks your credit history and approves you, your credit score still drops by a few points. This is because they’ve had to run a hard credit check or inquiry so they could see your full credit history. Every hard check results in a small deduction of points from your score. So, after receiving a new credit card, you could go back to check your score and find it’s lower than before.
A credit card provider will carry out a hard pull on your credit only after you apply for a card (not for preapproval). This means they’ll request your full credit report from one or more credit bureaus, but almost always from Experian, TransUnion, and Equifax (the top three).
The good news is that each hard check takes only a few points off your score. This means that small drops in your total, especially if you’ve recently applied for credit, are nothing to worry about. They’re also temporary, and if you continue to use and manage your credit responsibly, your score will go up again.
There’s no direct answer to the issue of by how many points does a hard inquiry affect your credit score. It depends on the frequency of your credit applications. If you’ve applied for several credit cards in a short time, then all those hard checks can take tens of points off. Remember, it doesn’t matter whether you accept the credit offer or not; it’s the hard pull that deducts points – every time.
Ask to go through the issuer’s preapproval process first. This requires only a soft check, which won’t bring your score down. Of course, getting preapproval doesn’t guarantee you a credit offer if you do make a full application. But it lets you know the probable outcome and allows you to avoid a hard check if it seems like you wouldn’t be successful. It also helps to know which everyday financial activities require hard checks, so you can go through with them only when you’re really serious. These include applications for a:
Asking your credit card provider to increase your credit limit can also take points off your score, even if they agree. Why does requesting a credit increase hurt your score like this? – It’s that hard inquiry again.
That said, not every lender will run a hard credit check to see if you meet the requirements. “Credit card issuers aren’t always clear about whether the request will result in a hard or soft inquiry, but some share this information online,” says Experian. They also have some good advice: “If you’re unsure and can’t find the information online, call your card issuer and ask whether it will use a soft or hard inquiry. You can also ask if it’s likely that your request will be approved.”
Lenders and creditors report new information about your activity to the credit bureaus. The bureaus then update your credit report, usually once a month to every 45 days. Commercial credit scoring systems like FICO and VantageScore then use that to calculate your credit score. You can use a free online tool to check your score for updates as often as you like.
Reading your credit report can help you make sense of updates to your score. If you request your report from any of the credit bureaus, it’s treated as a soft check, so no points are deducted. You’re entitled to a copy of your full report once a year from each of the three main agencies; however, according to USA.gov, owing to the financial hardships of the COVID-19 pandemic, you can now get a free credit report every week through April 2022.
If your score has gone down because of multiple credit card applications, then the solution is to stop applying, at least for now. According to Money, “a string of hard inquiries could signal to lenders that you are taking on too much debt.” Experts advise waiting at least three months between applications, and even more if your score is low. Hard checks stay on your report for two years, but their effect on your credit score should go away sooner than that.
Building up better credit takes time, especially if you’re starting from a low score. If you’re feeling a little frustrated, “Why is my credit score not going up?”, get a copy of your credit report and check whether any of these issues might be holding you back:
Knowledge is power when it comes to improving your credit health. If your score is low, you can’t fix it unless you know why.