Q: I recently heard every time your credit is reviewed it hurts the score. Please explain how this works and what it does to the score?
A: Credit reviews are also known as inquiries or pulls. There are two kinds, the first is referred to as a soft pull and it does not affect the score. The second is a hard pull or inquiry and could drop the score up to 5 points each review.
Soft inquiries, which occur when consumers pull their own credit, receive an offer for a reduced interest rate promotional credit card, or have an insurance company review credit for policy approval, do not affect the credit.
Hard inquiries or pulls occur when consumers give authorization to a third party to review their credit during an application for most types of financing including mortgages, an increase in a credit card limit, new credit card approvals, and more.
While shopping for a mortgage, car, or student loan consumers have a window of time in which numerous inquiries will have a limited affect on credit scores. Most mortgage banks today use a 14 day window. If a consumer is shopping for a mortgage with a variety of banks it is wise to have them all pull credit within a few days of each other, limiting the damage to the score.