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The effects of credit applications on credit score

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Daniel Cohen
UpdatedMay 15, 2011
Key Takeaways:
  • Review how credit applications lower your score.
  • Understand that the effects are minimal, unless the applications are excessive.
  • Submit multiple applications for the same product within two weeks of the first application

Credit applications and their impacts on your credit score.

Does applying for a credit card or a car loan have a negative effect on your credit score?

Thank you for your question about applying for credit or for a loan and how it affects your credit score.

The short answer to your question is "Yes." Your credit score is lowered when you apply for credit, whether it is a loan or a credit card. When you apply for a credit card or a loan, the credit card issuer and the auto-financing company will pull your credit, to judge your creditworthiness. This will determine, in large part, whether you are approved for the credit card or auto loan as well the interest rate you will receive.

Hard Pull

This kind of inquiry to your credit report is called a 'hard inquiry' or 'hard pull.' Hard pulls lower your credit score. According to, individual inquiries usually have a small impact on your credit score, resulting in a drop of less five points for most people. However, if you have a limited credit history or very few accounts, the impact will be larger. Credit inquiries are viewable on your report for two years, by any who accesses them. While they appear for two years, credit inquiries only affect your score for the first year they are on your report.

Rate Shopping

While each inquiry appears on your report, it does not mean that each inquiry is viewed as a separate event. For instance, the credit scoring formula recognizes that consumers benefit from shopping around for the best rate, when looking to secure auto , student, or home loans. Because of this, credit inquiries that are made within a 14 day period for the same product are viewed as one inquiry when it comes to your credit score. Each inquiry shows on your report but it only counts against your score one time. Therefore, when rate-shopping, make sure to keep this rule in mind.

Soft Pull

Hard pulls are different than soft pulls. Soft pulls do not lower your credit scores. Soft pulls occur when you view your own credit report, when your employer pulls your report, or when a credit issuer views your report to screen you for a pre-approved credit offer.


A single application for credit or a loan is likely to have a very tiny effect on your credit score. The key is to avoid excessive applications. Large number of inquiries are associated with greater risk and will lower your score. The exception is when you are applying for the same financial product within a two week period, when the separate inquiries are viewed as a single event, in terms of your score.