Why do hard pulls on your credit make it go down?
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A hard pull strongly correlates with taking on new debt that hasn’t yet shown up on your credit report. New debt means you’re at higher risk of not being able to pay off even more debt.
As an example… I bought a new car on Friday. The dealership ran my credit Thursday in order to see what loans were available to me. I can see the hard pull on my credit report/score already. But it’ll take a few weeks for the loan to get set up, for the account to start getting reported to the credit bureaus (likely not until I make my first payment in May).
So if I were to go apply for a mortgage this week, I am higher risk on account of that new car loan. It’s harder to juggle a new mortgage and a new car loan. But the car loan and its balance don’t yet show up on my credit report. The hard pull is the best means of saying “this customer may have pending new accounts or may also be looking to take on additional debt.”
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