When you apply for a new line of credit, whether it’s a credit card, car loan, or mortgage, it almost always entails the issuer checking your credit score. This is known as a ‘hard pull’ or ‘hard credit inquiry’ and it is beneficial to understand how they influence your credit score. If you plan on earning lucrative welcome bonuses from credit card offers it is almost essential.
If applying for credit cards to earn miles and points is new to you, then likely you have some questions regarding multiple hard inquiries and how they stack, impact your credit score and how long they show on your score. This post aims to debunk the mystery behind hard credit pulls and their impacts.
When you request a line of credit the issuing company or entity will likely pull your credit score to evaluate your creditworthiness. In the instance of applying for credit cards to earn points and miles, the issuing bank will look at several factors of your FICO credit score before deciding whether to approve your new application. One of these factors is how many recent hard credit inquiries show on your account, if you have too many you may appear to be more risky to the bank.
In comparison soft inquiries, also known as a ‘soft pull’, refer to credit checks that are not initiated by you. These soft inquiries generally have no impact to your credit score and only stay on your report for 1 year. Often times banks and credit issuers send out marketing offers for pre-approved credit card offers which will involve a soft credit inquiry. As a consumer you have no control over how many soft credit inquiries occur on your account, and most folks will have several soft pulls on their report at any given time.
Hard inquiries will show on your credit report for a maximum of 2 years, however as more time passes since the inquiry was made, its impact will diminish. If there is any impact to your score it will be within the first 6 months, and after 12 months they no longer impact your credit score. In all practicality, if you have a healthy credit profile, hard inquiries don’t have that much of an impact.
It’s still good to know that the three major credit bureaus---Experian, TransUnion and Equifax---all remove hard inquiries from your file after 2 years. In the past many people have tended to apply for credit cards in batch applications on a rotating 91+ day period, which is generally long enough for the the impacts of hard pulls to diminish.
Hard inquiries are identified with different titles depending on the credit bureau:
TransUnion – Regular inquiries
Experian – Requests viewed by others
Equifax – Inquiries in the last 12 months
Although it’s important to know how long credit inquiries stay on your credit reports, many people are concerned about how much they will impact their credit score. As mentioned above, soft inquiries have no negative impact to your credit score. But unlike their harmless counterparts, hard inquiries have the potential to impact your credit score.
The extent of the impact to your score depends on a number of factors and where your overall credit profile stands. The FICO formula that is used to calculate your score is not shared with the public, so know one really knows the exact numbers. That said, if you have a higher credit score and healthy credit profile these hard inquiries likely have a small impact. It is often presumed that each credit inquiry will drop your credit score by 2-5 points, but the FICO says the actual impact can vary from person to person.
As far as the impact to your credit score it’s important to note that even though hard inquiries stay on your credit reports for two years, after the first year has passed they will no longer be calculated into your credit score. They generally have the most impact during the first 6 months.
A quick breakdown of how hard inquiries impact your credit score:
First 6 months: highest impact
After 1 year: no impact
After 2 years: removed from credit report
The impact to your credit score from applying for new credit cards will ultimately depend on your unique credit profile. If you have a strong credit score each hard inquiry may ding your credit score by 2-5 points, but again this is depending on your unique credit history.
From my experience my credit score increased upon applying for new cards since having multiple credit accounts can be beneficial to your credit score. After all, you have to show that you can responsibly manage your existing credit lines. It is not uncommon for someone to apply for multiple cards each year and maintain a high credit score above 780+. Each year I generally open 7 to 15 new credit cards to reap the huge travel benefits of free airline miles and points. During this time my credit score has never dropped more than 10-15 points each time I apply for a new round of cards, and several months later (after the hard inquiries fall off) my score returns to its previous level.
The key for anyone applying for cards to earn points and miles is to responsibly manage your credit score and pay off your balance in full every month. The important point to understand when applying for credit cards to earn miles and points include the basics of how your credit score works, the impacts hard inquiries will have on your score, and the best strategies to minimize the number of hard inquiries. After all, you want to get approved and earn the bonus for the credit cards you apply for.
One known strategy when applying for credit cards to maximize the lucrative bonuses offered includes to apply for multiple cards on the same day. In practice, if an issuer pulls your credit from the same credit bureau on the same day, the two credit pulls will be consolidated into only one hard credit inquiry.
If you go this route, to play it safe you may want to submit all applications well before midnight as different bureaus may be based out of different time zones. However, you may also check to see where their headquarters are located to guess what time zone they are in.
A quick example of how this works: let’s say you want to apply for 4 credit cards to earn the lucrative airline mile welcome bonuses offer from them. If you apply for 1 card per day over 4 days it will result in 4 separate hard credit pulls on your credit report. However, if you apply for all 4 cards on the same day and your credit reports gets pulled twice from Experian and twice from TransUnion, it will only result in 2 separate hard credit pulls.
It’s a simple strategy, but now you can see how applying for multiple cards on the same day can help limit the total number of hard inquiries that post to your credit report. In the worst case, the issuers pull each of the big three credit bureaus and which should only result in a maximum of three hard credit pulls.
Another strategy to further manage your credit score is to try to find out which credit bureau an issuer will pull when applying for a credit card. One of the best ways to do this is by looking on CreditBoards.com’s credit pull database to see what other consumers have reported. This is not a 100% certain way of knowing, but if someone applied for the same card in the same area then it will likely result in the same credit pull.
The best way to insure that you are approved for new credit cards is to ultimately apply in moderation. In the miles and points game the key to success is to take opportunities when they arise and treat the game as a marathon, rather than a sprint. You don’t have to go and apply for every credit card offer in one year, it’s likely these offers will be around for a long time to come and you will have enough time to earn miles and points from them.
That said, choose which airline miles and hotel points will fit your needs the best within the following year. Then narrow down several of the best offers and choose to apply for those. After you have earned the bonus on those offers you can then re-evaluate your point balance and choose to which cards to go after next.
The biggest thing is to prove that you can also be a valuable customer and use the cards, and not appear as though you are aggressively applying for EVERY credit card available. So, moderation is key. Apply for a few cards every 91+ days to allow some hard inquiries to drop off your credit report or apply for 1-2 cards every month or two throughout the year, picking off the best mega-bonuses when they come around.
In either case if you apply for many new credit cards it will pay off to allow some hard credit inquiries to drop off your credit report before going after some new offers, and in the long run you will be able to earn plenty of airline miles and points.