Do hard pulls have a linear effect on credit scores?

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Do hard pulls have a linear effect on credit scores?

Postby onechannel » Thu Aug 27, 2015 8:05 am

I recently applied for (and, for the main part, was accepted for) a number of credit cards. As one does, I noticed that the hard pulls incurred by those applications resulted in minor decreases of my credit scores. (Aside: as I understand it, those hard pulls stay on my reports, and have the negative effect that they have, for a year.) My suspicion is that the increase in total credit limit and number of available credit lines will soon outweigh the effects of the hard credit inquiries.

There may be some false assumptions baked into what I said above; if so, I'd definitely like to be corrected. But my actual question is this:

This isn't quite accurate, but for the sake of simplicity: suppose that the first two hard credit inquiries lowered my Equifax score by one point.

(1) If I make two more hard credit inquiries, will my score by lowered by an additional single point? Does the following equation hold?

score_after = score_initial - constant * number_hardpulls

In this simple example, I'm suggesting that the constant is 0.5.

(2) Alternatively, is it the case that the more inquiries you do, the more each one hurts you? That might look something like this:

first two hard inquiries: -1 point (each one resulted in -0.5)
next two hard inquiries: -2 points (each one resulted in -1)
next one hard inquiry: -2 points (by itself resulted in -2)
next one hard inquiry: -4 points
next one hard inquiry: -8 points

In this possible case, the most important thing is the number of inquiries that are made within the 12 month period.

(3) Alternatively, is it the case that it's a fixed cost for the credit score that you have at the time that the hard inquiry occurs? That might look something like this:

Starting score: 650 (cost for an inquiry is 0.5 points)
First two inquiries: -1 points (-0.5 each)
Resulting score: 649 (cost for an inquiry is still 0.5 points)
Subsequent eight inquiries: -4 points (-0.5 each)
Resulting score: 645 (cost for an inquiry is now 1.0 points)
Subsequent five inquiries: -5 points (1 each)
Resulting score: 640 (cost for an inquiry is now 2.0 points)
Subsequent three inquiries: -6 points (2 each)
Resulting score: 634 (cost for an inquiry is now 3.0 points)

(4) The other possibility that comes to mind is that it's a combination of (2) and (3). For a given credit score, the Nth credit inquiry has a particular cost. There would be a table something like this

Code: Select all
|  Cost in points   | 1st-5th hard pull | 6th-8th hard pull | 8th-10th hard pull | 10-11th hard pull |
| Credit Score: 650 | 0.5               | 1.0               | 2.0                | 3.0               |
| Credit Score: 645 | 0.75              | 1.5               | 2.5                | 4.0               |
| Credit Score: 640 | 1.0               | 2.0               | 4.0                | 8.0               |
| Credit Score: 635 | 2.0               | 4.0               | 8.0                | 16.0              |

In this scenario, the cost of each additional inquiry is based both (a) on the number inquiries you already have on your record (for the 12 month period) and also (b) on the credit score that you have at the time that the inquiry is made.

Well, there may be trickier alternatives that I'm not considering--linear versus exponential growth of cost as number of inquiries increases but score stays the same, for example--but these seem to cover all the fundamental cases.

Is the actual scenario something like one of these four alternatives?

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Re: Do hard pulls have a linear effect on credit scores?

Postby Whatamuji » Thu Aug 27, 2015 11:20 am

From my personal experience I've noticed that there is a 12 point increase / decrease depending on whether I'm opening account / gardening or whether I've been denied. This is just observations and not scientifically proven.I also wanted to mention that hard pulls stay on your account for 2 years. Though, and this is what stumps me personally, they only do major damage for the first 6 months. The assumption that your credit lines will somehow diminish the effect hard pulls have on your account is probably not the best thinking to have. It may lead to the assumption that since I have a lot of credit I can survive tons of hard pulls. Which is not the case at all.
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Re: Do hard pulls have a linear effect on credit scores?

Postby CarefulBuilder14 » Thu Aug 27, 2015 12:57 pm

Inquiries have a diminishing marginal effect on FICOs. By the time you have 10 inquiries or so, most of the damage is done. Another 10 won't hurt your FICOs very much.

Of course, it's the report that matters, and not the score. An issuer may not like to see a lot of inquiries, even if they are 23 months old and about to fall off.

Plus, inquiries often mean new accounts, and new accounts do their own damage to FICOs.
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Re: Do hard pulls have a linear effect on credit scores?

Postby takeshi » Thu Aug 27, 2015 10:16 pm


Inquiries are a relatively small factor though the impact can vary by credit profile.

Additionally, different scoring models weigh factors differently. You can't simply assume that all models weigh inquiries exactly the same way.

You're not going to reverse engineer credit scoring algorithms by only looking at your own scores and data.

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Re: Do hard pulls have a linear effect on credit scores?

Postby Kevin86475391 » Fri Aug 28, 2015 4:01 pm

I LOVE how precise and mathematical you were in your scenarios/questions, and I do so wish there were definitive, publicly known answers out there that we could find. However, unfortunately the credit bureaus are notoriously cagey about the exact mathematical particulars of how the scores are calculated. They'll let consumers know basic, general stuff like "more inquires = bad" but they definitely haven't and likely never will reveal exactly how the calculations are performed. So any answers you get are pretty much just speculation, informed guesses, and personal observations.

However, a few points I can clarify:
-Inquiries stay on your credit report for 2 years, not 1
-They actively affect your credit for only 1 year, after which they're irrelevant to your direct score, but could have an impact if a credit analyst manually pulls your report and sees that you have a history of frequent, numerous pulls.
-I think (but am not positive like the above two points - just me speculating), that their affect on your score is more significant early on, indeed probably most within the first 6 months like Whatamuji said. I think they sort of 'taper out' in impact and quit being impactful entirely after 12 months.

My speculation is that it's absolutely a combination of scenario 2 and 3 like you mentioned. I'm reasonably confident in asserting (but still just guessing) that an inquiry has more impact on someone with an 840 credit score than a 540 credit score.

I'm quite sure credit history, age of oldest and average account, etc. also make a difference and thus even 2 people with the same FICO score and number of inquiries are *probably* (again, just guessing) affected differently by each inquiry since they also have different credit history lengths and other profile factors.

Final speculation, I doubt there's a linear affect at all. I think it's probably more of a bell curve/slope type thing. Like 1 inquiry probably has less impact than 2, which probably has less impact than 3, but when you reach a certain point I'm sure it peaks and starts going down again. Like CarefulBuilder14 said, the first 10 inquiries almost certainly have much more impact than a second 10 would, but I do suspect the 2nd and 3rd have more impact than 1st.

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