Can Applying for New Credit Impact my Credit Score?

CRC Credit Bureau Limited Created on: 8 August, 2022 Last Updated on: 8 August, 2022
Can Applying for New Credit Impact my Credit Score?

To understand how applying for new credit affects a credit score, it is imperative to

understand what a credit score is. Our blogpost published May 2019 defines credit scores

and provides insights into the importance of maintaining a good credit score as well as

practical tips on how to monitor it. Therefore, applying for new credit may impact your credit

score, but the application alone is not nearly as important as how you use your new account.

Credit scores can be viewed by the consumers who own the scores or by financial

institutions and credit granters who are prequalifying customers for loans, reviewing an

application for a loan, increasing or decreasing credit lines. These are called “soft” and

“hard” inquiries. 

Every loan request to a financial institution and/or credit granter enables them to view your

credit profile as they are required to examine your credit score and/or history, along with

other documents provided, to determine your creditworthiness. When the lender requests a

credit report for the purpose of evaluating a loan application, it's often referred to as a "hard

inquiry" or a "hard pull."

Each hard inquiry gets added to the credit report and can have an effect on the credit score.

This is due to the fact that credit scoring models may interpret multiple new inquiries in

various ways. These ways range from pursuit of new credit lines for various purposes

separate from present circumstances to possible signs of financial distress.

Hard inquiries are just one of many factors that make up a credit score and once too

frequent can reduce the credit score by a few points. The reduction in a credit score by a few

points may be regarded as a minor factor and thus may not negatively impact a credit score.

However, six or more hard pulls can significantly affect a credit score negatively and infer

bankruptcy to a lender.

CRC Credit scores are computed using some factors and these factors carry different

weights. The factors and the weights attached to them are as follows:

1. Payment history – 35%

2. Credit utilization or how much of available credit in use – 30%

3. Length of credit history – 15%

4. Credit mix, or the different types of credit products in use – 10%

5. Enquiries made by the customer for credit such that customers shopping around for

credit obtain low score here – 10%

Therefore, while a few hard inquiries may reduce a credit score by a few points, repaying

loans taken and carrying a low amount of debt may be far more important to adhere to than

recent inquiries.

Thankfully, some credit scoring models consider multiple hard inquiries in a short period for

certain types of loans, such as auto loans and home mortgages, a single inquiry rather than


multiple enquiries. This is to prevent the credit score of the loan applicant from declining as a

result of interactions with various institutions to take advantage of the best rates.

Soft inquiries or soft pulls, occur when consumers view their individual credit scores or a

lender, credit card issuer or credit granter views a score to preapprove consumer(s) for a

product or service. An example is Insurance companies requesting soft inquiries during the

preapproval process for select insurance products. Regardless of the source of the soft

inquiry on a credit profile, it may appear as an inquiry however it will never affect the credit


In view of the importance of hard inquiries and the effect they have on credit scores, three

questions remain foremost to address.

How Long Does a Hard Inquiry Stay on Your Credit Report?

Hard inquiries will stay on your credit report for two years, but the effect on your credit score

will decrease over time once there are no new hard inquiries. 

How to Remove a Hard Inquiry from Your Credit Report

Hard inquiries conducted with the consent of the credit score owner may not be removed

from the credit profile. Instances where consent was not given it may be possible to dispute

the hard inquiry with the lender and or credit granter. Information of this nature may also be

brought to the attention of the credit bureau requesting for the lender for further investigation.

How to Minimize the Effect on Your Credit Score When Applying for New Credit

When applying for new credit, there are a few things that may be done to reduce the impact

of a hard inquiry on the credit score. First, discuss terms and conditions with various credit

granters prior to formally applying for a loan or post-paid product and service. This will

ensure there are no hard inquiries till there is clarity on which lender to apply to. 

It remains important for individuals to monitor their credit profiles to see how these new

inquiries affect their credit scores. There are various tools that can be used to achieve this.

One of these tools is CRC Monitors and Alerts. This enables all individuals to have insights

to every new change on their credit profile as they are reported to the credit bureau. 

Request for CRC Monitors and Alerts today by clicking on this link


1. Does applying for a credit card hurt your credit? (2022)


2. The 5 reasons why your credit score might suddenly drop (2022)

3. New Credit: What It Is and How It Impacts Your Credit Score (2021)