Trying not to turn this post into a rant, but gosh, our credit system has infuriated me for years.
I am a ghost in the system, a reject of society as far as credit goes. The credit gods have deemed me unworthy to own a single credit card. My great offense? Lack of credit history. I can’t build up credit history because no one will approve me for any kind of credit due to lack of credit history.
I fought back by financing a car through use of a cosigner. Not good enough. I paid $200 bucks plus $25 annual fee to own a pathetic secured credit card. Never late. Never missed a payment. I was so relieved last Christmas when my credit finally started going up to 685 according to one website.
I felt confident enough to try and apply for a new credit card. Denied immediately. Argh!!! You can’t imagine the frustration if you’ve never been on this side of the fence. To add insult to injury, my credit score was dropped to 677 for the inquiry.
Why on earth would the system punish me even more because I am trying to get new credit? I never would have dreamed that being responsible with my money in my younger years would lead me to problems of getting a car, apartment, and even a freaking iPhone!
People seek credit when they need credit. People that need credit don’t have any money to pay back the credit. Thus, a person that looks around for people to give them loans must not have any money and are therefore a greater risk.
There is something strange going on, or details missing, because there is no reason on earth why you should not be able to obtain a simple low-limit credit card.
But to answer your question, credit bureaus will temporarily adjust your score downwards for hard inquiries because they have determined that people who apply for credit and don’t have strong histories are a slightly higher risk for default. (Some of them will apply for all the credit they can get, pay for some emergency expense, then default, for example.)
Nonetheless, the actual adjustment is minor compared to your overall score.
Yeah, it makes no sense to me. I even get pre-approved offers and get rejected every freaking time. I finally stopped trying since it was hurting my credit history even more. The official reason I always get is not having enough credit history.
My advice to the OP is to join a credit union. Establish yourself as a good member: don’t overdraw your checking account or do anything else that makes you look unworthy. Keep a non-trivial amount of dollars in your savings account. After a while they may ask you if you want a credit card. If they haven’t after about a year, apply for one. If they refuse, try for a small loan, a few hundred dollars to buy an appliance or something. And, of course, pay it off on time. After that, you probably can get a card.
The fact that you “didn’t get it” is not recorded on credit reports. People apply for credit all the time and do not open accounts because they didn’t like the terms offered or they just didn’t feel like it. There is no way for prospective creditors to look at inquiries on your report and know if they were denied or ignored. (Unless, of course, they were the original creditor who denied you.)
The logic I’ve heard is that credit enquiries were considered likely indicators of applications for credit or other spending. Too many enquiries, suggests the person keeps looking for credit. If simply checking your own score triiggers this, it is obviously a flaw in the algorithm; but there’s no incentive for the credit agency to fix it. After all, frequent checking may indicate someone itching to get to some magic number to request more credit - still not the best credit behaviour.
It doesn’t. The credit bureaus differentiate between “hard” and “soft” pulls for this purpose. Hard pulls are only supposed to be used for someone applying for credit. Soft pulls are used for people checking their own reports, identity verifications/background checks, and potential creditors who want to decide whether to send you junk mail.
Being pre-approved doesn’t mean shit, just so you know. Everyone and their dog is pre-approved; that doesn’t mean approved, or more likely to be approved, it means they want you to apply because you’re on a mailing list or something.
What kind of credit cards are you applying for? Most of the time, I see people fail because they start out with a $200 limit card and then start applying for premium cashback cards after a couple months. It doesn’t work that way. Building credit takes time.
The best thing to do is to get a card soon that you can keep for a long time (because it has no fees). The best cards to go for are store credit cards that can only be used at that store (no Visa/MC affiliation). These generally don’t have annual fees and are easy to get because the merchant backs them. When I messed up my credit just after college, I got a non-Visa Target card (no longer available, I think) that they’d slowly increase the credit line on, then eventually converted to a Target Visa. Kept it for many years, because it’s the oldest credit line on my credit and that’s a boost.
As to your original question, credit inquiries hurt for a short time because creditors generally don’t want to lend to people who are desperate for credit. If you’re applying for several credit cards in a month, it tends to imply you’re in financial peril.