A “hard inquiry” refers to a credit inquiry or credit check initiated by a lender or creditor when an individual applies for credit, such as a loan, credit card, or mortgage. Unlike a soft inquiry, which occurs when an individual checks their own credit report or when a credit card company pre-approves a potential customer, a hard inquiry involves a more thorough review of the individual’s credit history.

Key points about hard inquiries:

1. **Credit Application:**
– Hard inquiries occur when an individual applies for credit. This can include applying for a credit card, auto loan, personal loan, mortgage, or any other form of credit.

2. **Impact on Credit Score:**
– Hard inquiries have an impact on the individual’s credit score. While the impact is generally small, each hard inquiry can lead to a temporary decrease in the credit score. The effect may be more significant if there are multiple hard inquiries within a short period.

3. **Credit Report Access:**
– When a lender initiates a hard inquiry, they request access to the individual’s full credit report and credit score. This allows them to assess the individual’s creditworthiness based on their credit history, outstanding debts, payment history, and other relevant factors.

4. **Duration on Credit Report:**
– Hard inquiries remain on an individual’s credit report for a certain period, typically two years. However, their impact on the credit score diminishes over time.

5. **Multiple Inquiries:**
– If an individual is shopping for the best interest rates on a loan, multiple inquiries for the same type of credit within a short timeframe (usually within 14 to 45 days, depending on the credit scoring model) may be treated as a single inquiry. This allows consumers to compare rates without being penalized for rate shopping.

6. **Negative Impact:**
– While a single hard inquiry is unlikely to have a significant negative impact on a credit score, numerous inquiries over a short period may raise concerns about the individual’s creditworthiness, potentially leading to a lower credit score.

7. **Pre-approval vs. Application:**
– It’s important to distinguish between pre-approval inquiries (soft inquiries) and inquiries associated with an actual credit application (hard inquiries). Pre-approval inquiries do not impact credit scores, while application-related inquiries do.

Managing hard inquiries is important for maintaining a healthy credit profile. While occasional inquiries are a normal part of the credit application process, consistently applying for multiple forms of credit within a short period can be perceived as a sign of financial stress and may impact creditworthiness. As a best practice, individuals should be mindful of how frequently they apply for credit and the potential impact on their credit score.