Credit Inquiry

AAA

DEFINITION of 'Credit Inquiry'

A transaction whereby a bank or other credit-issuing institution views an individual's credit report in connection with a loan or credit card application. The purpose of a credit inquiry is to evaluate an individual's likelihood to repay money that is lent to them (known as creditworthiness).


There are two main types of credit inquiries - a "soft" inquiry and a "hard" inquiry. A soft inquiry is normally initiated by the individual (such as checking one's own credit report for errors) and is not recorded on the individual's credit report. A hard inquiry is recorded on an individual's credit report when a third party views the credit report in response to an application for credit.

INVESTOPEDIA EXPLAINS 'Credit Inquiry'

Hard inquiries remain on one's credit report for two years. Having too many hard inquiries is detrimental to one's credit score because it may be interpreted as an individual attempting to greatly expand the amount of credit available. This is an indicator that one may be intending to expand the amount of debt outstanding, which is considered to increase the risk that a borrower will not repay a loan.

VIDEO

Loading the player...
RELATED TERMS
  1. Soft Inquiry

    A credit report check that does not affect an individual's credit ...
  2. Debt Snowball

    A method of debt repayment in which debtors pay off their smallest ...
  3. Hard Inquiry

    A type of credit report check that may lower an individual's ...
  4. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...
  5. Credit Card Balance Transfer

    The transfer of all outstanding balances from one credit card ...
  6. Account Inquiry

    Any inquiry into an account, whether it be a depositary account ...
RELATED FAQS
  1. How does refinancing my mortgage affect my FICO score?

    According to FICO, the act of refinancing your mortgage could potentially impact your FICO credit score in a few different ... Read Full Answer >>
  2. What is a good credit utilization ratio?

    Your credit utilization rate is a representation of the percentage of your current borrowing ability being used; basically ... Read Full Answer >>
  3. Why is it beneficial to innovate financial models and techniques used in quantitative ...

    The majority of consumers use credit cards at some point during their lifetimes to finance major purchases, earn rewards ... Read Full Answer >>
  4. How can I use quantitative analysis to evaluate investment decisions if I don't have ...

    While there are a few legitimate companies advertising that they can consolidate credit card debt, most are illegitimate ... Read Full Answer >>
  5. What are some common models that practitioners use in quantitative analysis of equity ...

    Credit cards can be a helpful component in reaching a financial goal or financing some of life's bigger expenses. Carrying ... Read Full Answer >>
  6. What are the differences between preference shares and bonds?

    Establishing a checking account with a bank requires more than an initial deposit or verification of a customer's identity. ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    Should You Close Your Credit Card?

    Find out the consequences before deciding to end your credit agreement.
  2. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  3. Credit & Loans

    What's On A Consumer Credit Report?

    A look at the various components and considerations that go into one's credit report and credit score.
  4. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  5. Credit & Loans

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  6. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  7. Credit & Loans

    Check Your Credit Report

    Make sure there are no errors holding you back from obtaining a loan.
  8. Credit & Loans

    How To Dispute Errors On Your Credit Report

    It just takes some time and effort to rebound from a nasty case of "credit rejection shock."
  9. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  10. Credit & Loans

    The 5 Biggest Factors That Affect Your Credit

    Credit companies rely on these factors to determine whether to lend to you and at what rate.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center