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Everyone that plays the credit card game to take advantage of lucrative welcome bonuses knows that hard inquiries are just part of the process. I get a lot of questions about how all these inquiries stack up--how it affects and how long it shows on my credit score. After I started applying for multiple credit cards per year I had a lot of people telling me that it must be risky or bad for my credit score. The fact is, it is not.
My credit score actually went up by 90 points within six months after opening my first card for a welcome bonus. Since then it has hovered around 760--give or take the 5-10 point drop/rebound caused by multiple hard inquiries. As far as I can tell there are little to no impacts to your credit score from opening up multiple credit cards per year to net hundreds of thousands of miles and points, so long as you are diligent about paying off your balances in full every month and monitor your credit score with a free service such as CreditSesame.com or Quizzle.com.
Since you will have hard inquiries every time you apply for a credit card, it is a good idea to get a grasp on when a credit card company or bank will pull your credit, the impacts to your credit score, how long they will last, and how to minimize the number of hard inquiries and maximize the number of credit card offers you are approved for.
What exactly is a hard inquiry?
A hard inquiry is whenever a company or entity runs a credit check on you--whether it’s to be approved for a credit card, loan or cell phone plan. When applying for credit cards, banks are concerned about several factors that have to do with your FICO score which is also made up of any recent hard inquiries. The less reflected on a credit score, the more confident the bank will be in you as a responsible consumer.
How long do hard inquiries show up on my credit score?
The length of time that hard inquiries stay on your credit report, depends on the bureau that initiated the pull on behalf of the company you are applying to do business with. Experian will drop hard inquiries after 30 days whereas hard inquiries from TransUnion and Equifax can appear on your credit score for about six months. However, after twelve months they should have absolutely no effect on your credit score. A lot of people on forums and blogs say that the impact of a hard inquiry diminishes after three months, which is why many people tend to do a round of credit card applications in a rotating 91-day period.
Depending on the company running your credit score, hard inquiries are identified with different titles:
TransUnion - Regular inquiries
Experian - Requests viewed by others
Equifax - Inquiries in the last 12 months
How much do hard inquiries affect my credit score?
Each hard inquiry has the potential to bring your score down by 5 points, but the actual impact depends on where your current score stands. The higher your score, the less of a negative impact your score will face due to several hard inquiry, but if you have a low score, one that is less than 700, your score may drop more significantly. Though, it really depends on the FICO formula, which is kept secret. Your FICO score is determined by your payment history, amount owed, length of credit history and new credit. However, how exactly it is calculated is unknown to the general public.
How to minimize the effect of hard inquiries
Keeping track of your credit score is important, especially if you want to track the health of your credit history, however, most people are worried that running their credit score will also ding them some points. This is not true, however companies like FICO will sell you your credit score and is reflected as soft inquiry. Soft inquiries have no effect on your credit score. There are companies that do allow free credit monitoring such as Quizzle and Credit Sesame. You are never hit with a hard inquiry and you are able to regularly check your credit score.
If you are interested in applying for multiple credit card offers, applying for each card at the same time or day will minimize the total number of hard inquiries. By having all the inquiries at the same time, the credit bureau that receives multiple inquiries will combine them into one. Your credit score should only reflect one inquiry per credit bureau, so a maximum of three no matter how many cards you apply for. If you are lucky it could even be less if the credit card companies pull the same bureau. Since several credit inquiries can also set off a red flag to credit card companies who may feel that as a consumer you may hold potential risk and shopping for money, it is always better to have less on your credit report when you are applying for a new card.
If you are not comfortable having a hard inquiry run on your account, ask the entity if they are running a credit check and whether it will be a hard inquiry. Recently, I had to call a reconsideration line for a credit card I was interested in and the representative asked for my permission to run a second credit check, which I declined because when I asked whether it would reflect as an additional hard inquiry, he said it would.
Nowadays, even banks run hard inquiries for opening a checking account, so in many cases they are just run-of-the-mill systems.
Here’s a list of non-credit card institutions that do run hard inquiries (brought to you from this Fat Wallet thread):
A
American Express Co. pulled Experian for a One Financial account without margin (combination brokerage/savings).
Ameriprise Insurance (division of American Express) - for car insurance quote (Equifax)
AT&T pulled Transunion for current customer moving from CA to OH initiating "new" landline
ATTWS - Equifax
B
Bank of America pulled TransUnion for a checking account.
Bank of Atlanta
Bank of New York pulled Experian for a checking account and a savings account.
BB&T pulled Equifax for a checking account.
Brookline Bank pulled Experian for a checking account.
Brown & Co. pulls a hard one for EACH account that you open with TransUnion.
C
Catholic Federal pulled TU for new membership and opening of new checking.
Charles Schwab Bank pulled Equifax for opening new checking and investor account (without margin option)
Charter One Bank pulled Equifax for a checking account under the name St. Paul Bank Corp.
Chase Manhattan Bank pulled Trans Union for a checking account.
Cingular Wireless pulled Equifax.
Citibank pulled Equifax (for opening 6-month CD)
Citibank pulled Trans Unions for a checking and savings account opened at the same time.
Citibank pulls hard inquiry for opening e-Savings account
Citizens - checking - Equifax
Clackamas Community Federal Credit Union - hard inquiry for savings and CD accounts
Comcast cable TV and HSI
ComED
Costco AMEX car insurance ran a Hard Inquiry on me
Countrywide (stopped pulling sometime in 2007)
D
DCU (Digital Federal Credit Union) pulls a hard inquiry from Equifax when applying for membership.
Directv
DishNetwork
Dollar RENT A CAR (see Thrifty below)
E
Ebank - checking - Equifax
Everbank - pulled Experian for a Money Market Account, as well as for a checking one.
F
Fidelity - LionBank (Not Fidelity Investments)
Financial Center Credit Union
Fifth Third - Opening Checking Account
Flagstar Bank - Checking - Pulls TU
G
GMAC Bank - pulled TU for their MM savings account
H
HARRIS BANK -- CD
I
Indiana Members Credit Union
ING Direct - When you open Electric Orange checking account, they will hard pull Equifax to determine the overdraft credit line limit for you. No hard pull for opening Orange Savings account.
J
Johnson & Johnson by Yale & Associates on Experian- employment
L
Local gas & electric utility (We Energies - Wisconsin)
Local Honda dealer- check + 5K credit card
Local Nissan dealer (Coral Springs Nissan Auto Mall) pulled a HARD one when I browsed their inventory
Local Toyota dealership- cash transaction
M
Marquette National Bank -- checking, savings, CD and safe deposit box
Meadows Credit Union pulled Trans Union for a checking account.
Mechanics Bank (sf) did hard pull from Equifax for a checking account.
Muriel Siebert & Co. pulled Experian for a brokerage account without margin.
N
National1St Credit Union - When opening an account/CD etc - Experian had pull
NASA Federal Credit Union - when applying for membership - Equifax hard pull
P
People's Gas
Pentagon Federal Credit Union
Presidential Bank pulled Equifax for a checking account under the name Presidential Savings.
Principal Bank pulled Equifax for a checking account, also pulls for money market account according to CSR.
Provident Central Credit Union, Bay Area, CA - When opening an account - Experean hard pull
Q
Qwest
S
Salem Five - pulled Equifax for a checking account.
Schwab - hard pull on Equifax for a checking account.
SCOTTRADE - hard pull on Equifax
Sprint - Long Distance for having them as the LD provider on a home phone.
State Farm Auto Insurance - for getting an auto insurance quote.
Suntrust - pulls an Equifax for opening of a checking account
T
T-Mobile for cell phone service on Transunion or Equifax
TD Waterhouse/Ameritrade pulled Equifax on an existing customer to open IRA
Thrifty RENT A CAR did hard pull prior to rental
U
UFBDirect.com - 3.30% on High Yield Money Market Savings
- US Bank ( online / phone only. soft pull when opening in branch)
V
Verizon - landline, DSL, or VoIP (on Equifax or TransUnion). Also for new cellphone account.
W
Wachovia-Transunion (or Equifax in some cases) for opening a checking account
Wanigas CU - Pulls to become Member, Pulls for Checking - Experian
Removing hard inquiries
Other than the fact that hard inquiries disappear from your credit history after six months, it’s rather difficult to remove hard inquiries. Disputing a hard inquiry may put you on fraud alert, which means that every time you apply for a new credit card or apply for a loan, you may have to go through red tape to confirm that you are who you say you are. However, there is an alternative route you can take to get rid of some inquiries and that is with “bumpage.” Bumpage occurs when several soft inquiries are made and bumps off hard inquiries, so essentially you can attempt to remove a hard inquiry by having multiple new soft inquiries added to your credit score.
Bumpage of hard inquiries is not guaranteed and is considered a loophole, but may work with dedication to credit monitoring services like Credit Karma. Unlike Credit Karma, Quizzle, and Credit Sesame, most of these services charge a fee, but for a low monthly cost depending on how important removing the hard inquiries are to you. Other monitoring services that can help bump off the hard pulls are American Express CreditSecure and Chase Identity Protection.
Bumpage methods can be costly and in my opinion the risk is not worth the reward. There have been reports of people's file being split and also having hard inquiries reappear after they were bumped off. With a little patience inquires will start to fade in 6 months, and FICO only counts them for a year.
Two strategies to maximize getting approved for credit card bonus offers
The first strategy, and the one that I tend to use is to apply for multiple credit cards on the same day. I prefer this strategy because it involves less time staying on top of all the current offers, and also provides a revolving schedule for applying for new cards, meeting minimum spends, and receiving bonuses. I like to do a round of credit card applications every 3-4 months depending of the top deals at the current time. As I mentioned earlier, when a credit bureau receives more than one hard inquiry on the same day, they combine the multiple credit pulls into one. For example, if I apply for a card from Chase, US Bank, and Barclays all on the same day and by chance they all choose to pull my credit from TransUnion--only one hard credit inquiry will post to my credit score. There is a little chance in this method because there is no way of knowing what bureau will be used, but the maximum inquiries that should post will be three--no matter how many credit cards you apply for.
Another strategy is to space out your credit card applications evenly over a month or two--slowly picking off top credit card offers as they come around. This strategy works as well because the month or so spacing will allow for past credit inquires to fall off over time. From my experience this strategy will not maximize the total number of miles and points you can earn, but is great if you only plan on getting a few top offers every year.
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