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.

VIDEO

Loading the player...

BREAKING DOWN '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.

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 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.
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 would someone change their Social Security number?

    In general, the Social Security Administration, or SSA, does not encourage citizens to change their Social Security numbers, ... Read Full Answer >>
  4. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  5. What types of liens are seen as good and which are bad for my credit?

    Creditors that allow purchases to be made through financing often require property to be pledged against a credit account; ... Read Full Answer >>
  6. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!