What does 'Credit Inquiries' on a credit report signify?

'Credit inquiries' on a credit report refer specifically to checks made by lenders when individuals apply for credit. When someone applies for a loan or a credit card, the lender typically performs an inquiry to assess the individual's creditworthiness. This action allows them to evaluate the applicant's credit history, including their payment habits and overall financial behavior.

Inquiries are categorized as either hard or soft. A hard inquiry occurs when a lender reviews your credit report as part of their decision-making process for a credit application, while a soft inquiry may happen when you check your own credit or when lenders pre-approve you for credit offers without your direct request.

Understanding that credit inquiries impact your credit score is crucial, as multiple hard inquiries within a short time can negatively affect your score. However, a single inquiry typically has a minimal effect. This aspect of credit reporting highlights the significance of managing credit applications judiciously.