Are credit pulls bad?

Credit pulls themselves are not inherently "bad," but their impact depends on the type of credit pull and the circumstances under which they occur. Here's a breakdown:

1. Hard Credit Pulls

• What They Are: A hard credit pull (or inquiry) occurs when a lender or creditor checks your credit report as part of their decision to lend you money or extend credit (e.g., applying for a mortgage, car loan, or credit card).
• Impact:
  • Temporary Drop in Credit Score: Hard pulls can lower your credit score by a few points (typically 5-10), depending on your credit profile.
  • Visible to Lenders: Other lenders can see hard inquiries on your credit report.
  • Frequency Matters: Multiple hard pulls in a short period can signal to lenders that you're seeking a lot of credit, which might be a red flag.
  • Time-Limited Effect: Hard inquiries usually affect your credit score for 12 months and fall off your credit report entirely after 2 years.

2. Soft Credit Pulls

• What They Are: A soft pull occurs when you or someone else checks your credit for non-lending purposes (e.g., checking your own credit score, prequalification offers, or employer background checks).
• Impact:
  • No Impact on Credit Score: Soft pulls do not affect your credit score and are not visible to lenders.
  • Common and Harmless: Examples include checking your own credit report or being preapproved for a credit card.

3. When Credit Pulls Might Be a Concern

• Applying for Multiple Loans/Credit Cards: If you apply for several credit products within a short time frame, the multiple hard pulls can collectively lower your score.
• Mortgage or Auto Loans: These inquiries are often grouped as a single inquiry if made within a certain "rate-shopping" period (usually 14-45 days, depending on the scoring model), minimizing the impact.
• Thin or Limited Credit History: If your credit history is limited, even a small drop in your score from a hard pull might have a more noticeable effect.

4. How to Minimize the Impact

• Rate Shopping: Apply for loans or credit cards within a short window to limit the impact of multiple hard pulls.
• Check Prequalification Offers: Many lenders allow you to check prequalification with a soft pull.
• Monitor Your Credit Regularly: Use soft pulls to track your credit health without affecting your score.