What is the impact of multiple hard inquiries on a credit report?

Multiple hard inquiries on a credit report may lower the credit score due to the way credit bureaus assess credit-seeking behavior. Each time a lender performs a hard inquiry, it indicates that a consumer is seeking new credit, which can be viewed as a potential risk factor. This is because multiple inquiries in a short period suggest that the individual might be experiencing financial difficulty or is overextending themselves with credit requests.

The impact of hard inquiries is generally more pronounced in the short term but typically lessens after a year. Most credit scoring models will count multiple inquiries for the same type of loan (like a mortgage or an auto loan) as a single inquiry if they occur within a specific time frame, usually 30 to 45 days. However, hard inquiries can still have a cumulative negative effect on an overall credit score, particularly if they are frequent.

Understanding this context is crucial for consumers, as it highlights the importance of managing credit applications and, ideally, limiting hard inquiries to maintain a healthy credit score.