How To Dispute Hard Credit Inquiries
We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau, or CFPB, for further assistance.
This could be a sign of identity theft, according to Experian, one of the three major credit bureaus. At the very least, youll want to look into it and understand whats going on.
Keep in mind, you can only dispute hard inquiries that occur without your permission. If youve authorized a hard inquiry, it generally takes two years to fall off your credit reports.
Examples Of Hard And Soft Inquiries
Most hard credit inquiries come as a response to a lending application, whether youre applying for a new credit card or applying for a new apartment . Soft credit inquiries, on the other hand, are credit checks that are unrelated to lending decisions. When you pull your own credit report, for example, you are conducting a soft inquiry on your credit.
Here are some of the most common hard and soft credit inquiries:
How To Increase Credit Limit While Also Improving Your Credit Score
Generally, a utilization rate under 30% is considered ‘good’ and positively affects your credit score. So, a higher credit limit can positively influence your credit score because it reduces your utilization rate as long as your credit use remains the same.
A credit limit increase can affect your credit score through a hard inquiry or by bettering your credit utilization rate. Whether you can qualify for such an increase depends on various factors, including your credit score and credit report. So, regular reviews of your credit score and report can maximize your chances at an increase.
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How Do Credit Inquiries Affect My Credit Score
Hard inquiries can negatively impact your credit score, but its often a minor scoring factor. Ultimately, the impact of a new hard inquiry will depend on your overall credit profile.
If youre new to credit or have a lot of hard inquiries during a short period of time, your score will likely be more impacted by a hard inquiry than someone with established credit and no other inquiries. Inquiries can stay on your credit reports for up to two years. However, some credit scoring models only consider hard inquiries from the previous 12 months.
Impact On Credit Score
Soft inquiries do not affect your . While soft inquiries do appear on your credit report, only you can see them.
Hard inquiries lower your credit score by a few points, though that shouldnt be a big deal in the long run. However, too many hard inquiries in a short period of time may give lenders the impression that youre a high-risk customer.
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Whats The Difference Between A Soft Credit Check And A Hard Credit Check
The main differences between soft and hard inquiries are what causes the inquiry and how they can impact your .
Hard inquiries are generally triggered when you apply for a new line of credit, while soft inquiries often result for other reasons. Soft pulls never impact your credit score, while hard inquiries can hurt your credit score.
For example, when you request a copy of your own credit report, the credit bureau only includes a soft credit inquiry. But when you apply for a credit card or personal loan, the bank pulling your report will generate a hard credit pull. Most creditors wont even see the soft inquiries on your credit reports, but they can see the hard inquiries.
Both soft and hard inquiries can stay on your credit reports for two years. Its also common to see different inquiries on different credit reports. For example, if you apply for a car loan and the lender only checks your Equifax credit report, the inquiry is only added to Equifax and wont appear on Experian or TransUnion reports.
What To Remember When You Are Rate Shopping
If you need a loan, do your rate shopping within a focused period such as 30 days. FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which the inquiries occur.
When you look for new credit, only apply for and open new credit accounts as needed. And before you apply, it’s good practice to review your credit report and FICO Scores to know where you stand. Viewing our own information will not affect your FICO Scores.
As a general rule, it is OK to apply for credit when needed. Be mindful of this information so you can start the credit-seeking process with more confidence.
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What Triggers A Hard Inquiry On Your Credit Report
If you see a hard inquiry listed on your credit report it is because you have applied for credit in the last two years.
This could mean that you applied for a credit card, whether it be a rewards card, a cash-back card or even a balance transfer card like the U.S. Bank Visa® Platinum Card.
A hard inquiry will also end up on your personal credit report when you open a business credit card. This is because your personal credit is usually reviewed by the issuer even when applying for a small business credit card, such as the Capital One Spark Classic for Business.
When you apply for a mortgage, student or auto loan, a hard inquiry will be noted on your credit report. There’s a difference, however, between applying for multiple credit cards in a short amount of time and shopping around for the best mortgage rate in a short amount of time.
“There are certain instances, such as applying for a car loan or a mortgage, that only count as one inquiry for scoring purposes as long as they occur within a certain window of time, typically 14 to 45 days,” Shon Anderson, a certified financial planner and president at Anderson Financial Strategies, tells CNBC Select. “The reason is they know you are probably shopping around for the best terms, and you are probably not going to get three or four car loans or mortgages all at once.”
How Much Will Credit Inquiries Affect My Score
The impact from applying for credit will vary from person to person based on their unique credit histories. In general, credit inquiries have a small impact on your FICO Scores. For most people, one additional credit inquiry will take less than five points off their FICO Scores.
For perspective, the full range for FICO Scores is 300-850. Inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. While inquiries often can play a part in assessing risk, they play a minor part are only 10% of what makes up a FICO Score. Much more important factors for your scores are how timely you pay your bills and your overall debt burden as indicated on your credit report.
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When Is It Appropriate To Request A Credit Limit Increase
Timing is crucial to determine whether you can receive a credit limit increase. Often, you want to wait until you’ve had some time with a credit card. If you make a request within the first few months of obtaining a new card, the company may not have sufficient data to determine whether a limit increase is viable.
To maximize your chance of approval, attempt a request when something positive happens in your life. For example, if your household income increases, your debt load decreases, or you’ve improved your credit score. These situations can signal that a credit increase is a low risk to your credit card provider.
How To Dispute Or Remove Credit Inquiries
Its possible to dispute or remove some credit inquiries from your credit report. If you initiated the hard credit pull by applying for new credit, you cannot remove the credit inquiry from your report. However, if the credit inquiry is the result of identity theft or some other error, you can file a dispute with the credit bureaus and request a hard inquiry removal.
To dispute a credit inquiry, follow the instructions associated with the credit bureau that developed the report.
According to a 2013 Federal Trade Commission study, 5 percent of Americans have errors on their credit reportsbut that doesnt mean every unfamiliar credit inquiry on your credit report is the result of an error. As Experian reminds us, credit inquiries can come from lender names we dont recognize and we often dont realize that applying for a car loan or a mortgage could prompt multiple hard credit inquiries from potential lenders. Think carefully about where those credit inquiries might have come from before filing a dispute.
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My Credit Needs To Be Checked Multiple Times While I Shop For A Competitive Interest Rate Should I Be Worried
If youre making a large purchase, such as buying a house or securing a mortgage, theres a chance youre shopping around for a competitive rate. During your search, lenders will likely request to check your credit.
Savvy tip: Multiple hard inquiries are generally treated as one hard inquiry for a given period . This allows you ample time to check different lenders and find the best loan terms without having a major effect on your credit.
Please note that this multiple-hard inquiry exception generally does not apply to credit cards.
How A Credit Score Is Calculated
Its impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders dont share the actual formulas they use to calculate credit scores.
Factors that may affect your credit score include:
- how long youve had credit
- how long each credit has been in your report
- if you carry a balance on your credit cards
- if you regularly miss payments
- the amount of your outstanding debts
- being close to, at or above your credit limit
- the number of recent credit applications
- the type of credit youre using
- if your debts have been sent to a collection agency
- any record of insolvency or bankruptcy
Lenders set their own guidelines on the minimum credit score you need for them to lend you money.
If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score.
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Why Does A Hard Credit Check Hurt Your Credit Score
A hard inquiry may hurt your credit score because it indicates youre looking for a new loan or line of credit. Taking on more debt could make paying your bills more difficult, which is why your score could drop.
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How Hard Inquiries Impact Your Credit Scores
Applying for a credit card or a loan will result in a hard inquiry on your credit report. As we noted earlier, inquiries make up 10% of your overall FICO score.
But how will your overall score be impacted? Well, 1 hard inquiry might lower your score from 0 to 5 points, depending on your credit history. If you have even more inquiries, this will be further magnified. In general, once you hit 7+ inquiries on your credit report, you should expect to see a significant drop of 50+ points in your credit score.
This shouldnt be a reason to avoid applying for credit since a hard inquiry is required to get the credit card or loan that you want. If your score is high enough, it will have little impact on your overall creditworthiness.
Problems arise when you have too many hard inquiries in a short period of time. This can be concerning to lenders since it is a sign of poor money management opening a lot of new credit accounts may mean youre having trouble paying bills and are at risk of overspending.
Bottom Line: Unfortunately there isnt a simple answer to how much your score will be impacted by a hard inquiry this will vary based directly on an individuals credit history and the number of inquiries on your credit report.
How Rate Shopping Is Treated
Bottom Line: Hard inquiries are rarely the reason you might be denied credit since they dont affect your credit score as much as other factors such as credit utilization and length of your credit history.
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How Multiple Credit Inquiries Affect Your Credit Score
Do you panic whenever a lender or landlord proposes pulling your credit report? If so, a lot of that anxiety may be overblown.
Too many credit inquiries in a short enough period of time will make a dent in your credit score, but this shouldnt deter you from rate shopping for the best offers.
Its ironic that so much attention gets focused on credit inquiries because they are such a tiny part of the FICO score, said Craig Watts, public affairs manager for the Fair Isaac Corporation .
We generalize by saying that typically no more than 10% of a FICO scores weight is determined by a persons taking on new credit, Watts said. But for most people, inquiries have little to no influence on their FICO scores.
To put that 10% into perspective, payment history, i.e. whether or not youve been paying your bills on time, makes up 35% of your credit score.
So, a credit inquiry is just a small nick in your credit report, but not all inquiries are created equal.
The Rate Shopping Exception
As mentioned, some hard inquiries might harm your credit score. Frequent credit applications indicate higher risk and could be a sign that youre in financial distress. Rate shopping, however, is an exception to the rule.
When you take the time to search for the best interest rate before taking out a new loan it shows financial responsibility, not higher risk. Because rate shopping doesnt indicate that youre more likely to default, FICO and VantageScore both include special logic in their credit scoring models that treats these types of inquiries differently.
This special logic is known as deduplication. Heres a look at how it works.
- 45-Day Safe Harbor Period: FICO considers all student loan, auto loan, and mortgage inquiries as one hard inquiry, as long as they occur within a 45-day window. Older versions of FICO scoring models feature a 14-day window instead.
- 14-Day Safe Harbor Period: VantageScore treats all inquiries that take place within a 14-day window as one inquiry, regardless of the application type.
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Who Does A Hard Pull
Since a hard pull is most often used to tell if you’re a good lending risk, they are used by an entity considering you for a loan or credit card. Banks, credit unions, and credit card companies rely on hard inquiries to make sound lending decisions. They’ll look at the information listed on your report to see if you are likely to pay back the money. These decisions affect all kinds of loans, including mortgages, private student loans, and car loans.
Applying for many loans over time almost definitely brings your score down. Each pull can have an effect, depending on the timing. A flurry of credit pulls over the course of a year, for example, may signal to a bank that you are desperate for moneyâand not a solid credit risk. Make each pull an intentional action.
If you rent, your landlord can also run a hard pull, but they can sometimes just run a soft pull. The application will often ask permission to do a background or credit check, and they canât do one without your consent. If youâre not sure which one they will run, ask them.