How Do Hard Inquiries Impact Your Credit Report
If you are constantly applying for credit , lenders may think you are less creditworthy. In this way, the record of hard pulls reflects negatively on your credit history, but not as much as, say, missing your repayments or defaulting on a loan.
FICOs algorithm for calculating your credit score takes hard pulls into account and they can result in a slightly lower score.
How Do Hard Inquiries Affect Your Credit Score
You wont be penalized for a soft inquiry because it doesnt mean anything negative about you or your personal finances. Repeated hard inquiries, on the other hand, can indicate financial instability and damage your good credit.
Repeated hard inquiries in a short timespan can indicate youve been unsuccessful in securing a loan because of a bad credit score, or you are applying for more credit than you can afford to repay. In short, potential lenders see you as a financial risk, and your FICO score or VantageScore will reflect that belief.
That said, hard inquiries dont always hurt your credit score significantly. If youre shopping around for a mortgage or auto loan, different mortgage finance companies or auto dealerships may conduct hard pulls on your credit in a brief time period. As long as they all occur roughly within a 14-day window, theyll only appear on your credit score as a single inquiry.
Other hard inquiries that wont affect your credit score include credit checks conducted by utility companies, auto insurers and credit card companies to determine:
- If then need a security deposit from you
- How to set your premium
- Ways to market new products to you
In fact, applying for a credit card can affect your credit because it’s generally a hard inquiry. If you suspect you might be rejected or dont need the credit, it may be wise not to apply not just to avoid the hard pull, but because opening too many new credit accounts can hurt your credit, too.
Best Practices To Mitigate Hard Inquiries
Because the impact on your credit history is relatively small, you shouldnt worry too much about hard inquiries if you are responsibly shopping around for a new lender.
The best way to reduce the effect of hard inquiries on your credit score is to improve your overall credit history. Focus on making loan repayments on time and reducing your overall amount of debt.
The first step toward improving your credit report is to see it yourself. There are now manyfree ways to check your credit score and credit report. Many banks now offer this service free to customers.
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Different Types Of Credit Inquiries
There are different types of credit inquiries that can take place on your credit report, including hard credit inquiries and soft credit inquiries. A hard credit inquiry can be a primary component of the underwriting process for all types of credit.
Soft credit inquiries, however, are often used more for marketing purposes not just during a loan or credit approval process. Its important to understand the differences between hard and soft credit inquiries because some inquiries can impact your credit report and .
Hard Credit Inquiries
A hard credit inquiry takes place when a company or entity has a legitimate business reason to look into your credit. In this case, the lender or creditor is seeking information about whether or not you will be reliable in paying the money back.
Your credit report will provide the lender or creditor with a report card of sorts in terms of your payback history, as well as other information such as how much credit you already have and what type of credit you carry .
There are a number of lenders and creditors that will typically use hard credit inquiries. These can include:
- Mortgage companies
- Lenders
When conducting a hard credit inquiry, the information that the lender or creditor has access to via your credit report can include the following:
Soft Credit Inquiries
A soft credit inquiry may be requested for a number of different reasons. One way that creditors often use soft inquiries is for marketing to potential customers.
How Long Do Credit Inquiries Affect Your Credit Score
Each hard inquiry on your credit report can hurt your credit score by up to 5 points each. Soft inquiries dont affect your credit at all. Having too many hard inquiries on your credit report at once can indicate to a creditor that you are desperate for money and may be in trouble financially.
Lenders may also assume that youve recently opened up a bunch of new accounts and could deny you credit because new lines of credit often take time to show up on your credit report.
Plus, while 5 points may not seem like a lot, it can quickly add up if you have applied for many loans or credit cards over the last two years.
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How To Prevent Unauthorized Credit Inquiries
There are also ways you can prevent an unauthorized credit inquiry from even taking place, which means you hopefully wont have to remove an unauthorized inquiry in the future. One strategy is to make your credit report inaccessible to lenders and creditors with a credit freeze.
A will place a lock on your credit report. This means that a lender or creditor will not be able to access your credit report in order to view your information. Implementing a credit freeze can also help keep hackers and identity thieves from opening new credit and/or applying for loans in your name.
Hot Tip: It is important to note that when you have a credit freeze in place, it can hinder your own ability to obtain new credit. For this reason, you can temporarily lift a credit freeze. All 3 of the big credit bureaus have programs available for putting a freeze on your credit.
What Is A Credit Inquiry Removal Letter
A credit inquiry removal letter is used to dispute an unauthorized inquiry. It is sent to the credit bureaus to request that a credit inquiry be removed. Once the credit bureaus receive your letter, they are obligated to investigate your claim with the creditor who placed the hard inquiry on your credit report. Under the Fair Credit Reporting Act, the information provider has 30 days to report back to the credit bureau with proof that you authorized the credit inquiry. If they fail to respond or provide proof, the credit inquiry must be removed from your credit report.
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Remember Inquiries Play A Small Role In Your Credit
While recent hard inquiries can hurt your credit scores, theyre generally not the leading reason for having poor credit scores. Removing hard inquiries may increase your credit scores by a few points, but you want to focus on the bigger factors when youre trying to build good credit.
At , we take a holistic approach to credit restoration. We can closely review your credit reports, help remove inaccurate negative information that may be hurting your scores, and guide you on the best ways to build your credit moving forward.
You Do Not Recognize The Company That Performed The Hard Inquiry
You might be wondering: Can I get hard inquiries removed if I do not recognize the entry? The answer is YES.
A lot of times, people just ignore hard inquiries in their credit report without carefully checking if these inquiries are accurate.
If you do not recognize the company and you were able to verify that you did not engage any credit application with the company or any of its associated companies, it is possible that the credit bureau made a mistake. You can have this mistake corrected by filing a dispute .
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Disputing Inaccurate Hard Inquiries Yourself
It’s important to check your credit reports regularly for accuracy. If, while doing this, you’ve noticed a hard inquiry on your credit report that you believe is the result of identity theft, you can file a dispute with each of the three national credit reporting agencies and petition to have them update the inaccurate information.
The first step is to review your Experian credit report through our Dispute Center and verify your information. Next, confirm that the inquiry was not a result of identity theft.
There may be situations where you don’t recognize the name of a company that checked your credit or you don’t remember applying for a loan with a company you do recognize. Here are a few scenarios when inquiries you don’t recognize may be legitimate:
If you don’t recognize the company name that performed the hard inquiry, contact the company for more information. When you check your credit report through the Experian Dispute Center, the hard inquiry will be accompanied by the company name and typically the mailing address and a phone number.
If you have verified that the hard inquiry is due to identity theft, then the dispute would be handled over the phone with Experian specialists. You can register with or log in to our Dispute Center to find our support options. There is no charge to use this service.
How To Write A Credit Inquiry Removal Letter
Sometimes companies and individuals make hard inquiries that you did not authorize. In those cases, there is a way to remove the hard inquiry and improve your credit as a result. Its called a credit inquiry removal letter or a credit inquiry dispute letter.
Even if a hard is questionable and you are not sure if you made it or not, you can dispute it as the burden of proof is on the credit bureaus and your creditors.
We have prepared a sample letter to send to the credit bureaus requesting an investigation of an unauthorized inquiry appearing on your credit report.
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Negative Credit Report Entries That Impact Your Score The Most
Accurate items will stay on the credit report for a determined period. Fortunately, their impact will also diminish over time, even if they are still listed on the report. For example, a collection from a few years ago will bear less weight than a recently-reported collection. If no new negative items are added to the report, your credit score can still slowly improve.
Combining Multiple Inquiries For Auto Mortgage And Student Loans
When you shop around for a mortgage, auto, or student loan, you may end up with multiple hard inquiries. However, youre not looking to take out 10 loans. Youre rate shopping for the best deal on one loan.
For this reason, credit scoring models are designed to include special rules for these certain types of loans in an effort to prevent your scores from being penalized for multiple inquiries for the same loan.
With FICO scoring models, all auto, mortgage and student loan inquiries that are fewer than 30 days old are completely ignored. After 30 days, the model breaks those three types of inquiries into a 45 day de-dupe period. Multiple inquiries during a 45 day period are grouped together and counted as one inquiry. This process is called collapsing.
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Can I Remove An Inquiry From My Credit Report
You cant remove a legitimate inquiry from your credit report.
The only inquires that can be removed from your credit report are those that are incorrect or erroneous, like if a lender made a hard pull on your credit without proper authorization from you. In these cases, you can submit a request to have the inaccurate details removed from your report.
How long do credit inquiries stay on my credit report?
For a legit credit inquiry, youll simply have to wait two years to have a hard inquiry taken off your credit report though itll only impact your credit score a year at most. On the other hand, a soft pull on your credit can only be seen by you and has no affect on your credit score.
Check Your Credit Reports For Free
The first step is to get your credit reports from each of the three credit bureausEquifax, Experian and TransUnion. Often, the same information is recorded on all three, but not always, and thats why its important to check all three.
You can typically pull your credit reports for free once per year on AnnualCreditReport.com. However, due to Covid-19, you can order free weekly credit reports until April 20, 2022.
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If Warranted File A Dispute With The Corresponding Credit Bureau
If you dispute errors in your credit reports, including unauthorized hard inquiries, the credit bureaus are required to investigate. Theyre also required to correct information thats found to be inaccurate.
You can file a dispute with any of the three major consumer credit bureaus Equifax, Experian and TransUnion that has an inaccurate hard inquiry recorded for you on its corresponding credit report. Credit Karma members can dispute errors on their TransUnion® report through the tool.
You may be able to dispute inquiries online, but consider mailing your dispute. Look for sample credit dispute letters online, like the one available from the Federal Trade Commission, to help you draft your dispute letter.
If the credit bureau in question investigates and finds that the inquiry wasnt authorized, it should remove the inquiry from your corresponding credit report.
You Did Not Authorize The Hard Pull
Can you remove hard inquiries from your credit report if you did not authorize it? The answer is YES.
A company can only perform a hard pull on your credit report if you give them permission to do so. Even if you recognize the company or if you have a current account with the lender, they are not legally allowed to do a hard inquiry unless you give them your authorization.
If you believe that the hard inquiry was done without your permission, you can dispute this inquiry. The lender or the credit bureau can then remove it from your credit report.
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Get Copies Of Your Credit Reports
Start off by requesting your three credit reports from AnnualCreditReport.com.
This service is free once every 12 months. Youll receive a credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion.
Each one needs to be viewed individually because the information that is reported to each may vary slightly. Lenders usually look at all three reports, and so should you.
Can You Remove Hard Inquiries From Your Credit Report
If a hard inquiry is the result of a credit application you made, it cannot be removed from your credit report. It is simply a matter of record, and it will fall off your report naturally after two yearsand will have no effect on your credit scores after one year.
However, if you discover a hard inquiry for a credit application you didn’t submit, it may be a sign of attempted fraud. In this case you can file a dispute to have the inquiry removed. Filing a dispute is free and fairly easy, but it’s only meant to help you remove incorrect information from your credit report. If the inquiry is determined to be the result of fraudulent activity, it will be removed.
If you find an unauthorized hard inquiry, be sure to review your reports for further signs of fraud, including unfamiliar accounts, and dispute them right away.
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Hard Pulls Vs Soft Pulls
Along with hard pulls, soft credit inquiries also exist that do not appear on your credit report and have no effect on your credit score. Checking your credit report yourself or applying for a pre-approved credit card are considered soft pulls. Other cases, like a periodic review of your credit by a company already lending to you or the Internal Revenue Service verifying your identity, can also result in soft pulls.
Importantly, checking your credit report yourself has no effect on your credit report or credit score.
Hard Inquiries Or Hard Credit Pulls
These can potentially have a negative impact on credit scores.
A hard inquiry usually happens when a lender is checking your credit in order to make a lending decision, such as a bank deciding whether to approve you for a credit card. Hard inquiries may occur when other types of companies check your credit as well, like a cell phone company deciding whether to give you a cell phone contract or a collection agency checking your credit for skip tracing purposes.
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What Is A Hard Inquiry
A hard inquiry occurs when you apply for a new loan or credit card. It involves the lender checking one or more credit reports to determine whether you meet its creditworthiness criteria. This is also sometimes called a hard credit check or hard pull.
Hard inquiries differ from soft inquiries in two major ways. First, hard inquiries occur when you apply for a loan, credit card or other financing.
Soft inquiries, on the other hand, can happen upon your requestsuch as when you want to check your credit reportor even without your knowledge, which happens when lenders check your credit before sending you a preapproval offer.
Second, soft inquiries don’t affect your credit score at all, while each hard inquiry typically knocks a few points off your credit score. The more hard inquiries you have on your reports, the riskier you’ll be viewed by prospective lenders. Why? Because applying for different types of credit relatively often could indicate financial instability, and that translates to risk in a lender’s eyes.
Hard inquiries stay on your credit reports for two years before they fall off naturally. If you have legitimate hard inquiries, you’ll likely need to wait until the 24-month period is over to see them disappear.