What Is A Soft Credit Inquiry
Soft inquiries often take place during an employment background check, when you check your own credit, or sometimes when rate shopping.
Soft pulls do not affect credit scores, no matter how often they take place, and they can even occur without the individual knowing about them.
Potential employers might ask to view a to get an indication of whether you manage your finances responsibly. However, they cant see information like marital status, or even your actual credit score. Insurance companies see a similar report, which doesnt give them your credit score.
Soft inquiries are often used by companies that send out preapproved financial offers by mail, for example.
You can review your own credit reports without worrying that it will affect your credit score. In fact, the Fair Credit Reporting Act guarantees the right to access credit reports from each nationwide credit bureau every year for free. Go to www.annualcreditreport.com to order reports from Equifax, Experian, and TransUnion.
You can usually see soft credit inquiries on your own credit reports. You might see language like inquiries that do not affect your credit rating with the name of the requester and the date of the inquiry.
Here are some of the benefits that can be gained from soft credit inquiries:
You can get prequalified for various types of loans.
You can receive prescreened credit card offers.
You can check your credit reports regularly to help ensure accuracy.
How Long Do Credit Inquiries Stay On Your Credit Report
Because hard inquiries impact your credit score, its critical to know how long they stay on your credit report. Typically, no inquiry should count toward your FICO score, according to credit bureau Experian. Hard inquiries remain on an Experian credit report for about two years, for example, but only impact your credit score for one year.
Lenders dont see soft inquiries when they order your credit report, according to Experian.
What Happens If You Have Too Many Inquiries
If youve racked up a ton of hard inquiries without realizing how it will affect your credit score, dont worry. If you take a break from applying for credit and focus on improving or maintaining a good score, it shouldnt be long before those inquiries have very little to no effect on your ability to get approved for a new loan.
Depending on why you accumulated them, the spate of recent credit inquiries may not even affect your score much at all. Thats because, depending on the scoring model, credit scores will often forgive a whole bunch of recent inquiries if they all occur at the same time and are for the same type of loan, such as an auto loan, mortgage or .
A large number of inquiries in a short period often signals that you are comparing offers rather than applying for a whole bunch of loans all at once. So credit scores will often automatically take that into account when calculating your score. Scoring systems recognize that youre shopping for the best rates when youre buying a car or buying a house and will only count them as one inquiry or ignore that completely, Griffin said.
Just make sure to do all of your shopping fairly quickly since the break you get on hard inquiries is limited. Depending on the scoring model, you should have anywhere from 14 days to 45 days to shop around for a home or auto loan and compare rates without getting penalized. According to Griffin, some models may also give you a break for shopping around for credit cards.
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Protecting Your Credit Score
If you apply for a number of similar loans in a short period of time the credit rating agencies can consider this to be ‘shopping around’, so even multiple hard pull inquiries on bad credit auto loans within a month should not have a drastic effect on your credit score.
If you check your credit report and it contains hard inquiries you didn’t authorize you can call or write to the creditor and ask them to remove them from your credit report. Credit repair companies can get these issues fixed to repair your credit score for you.
Remember, pre-approval for financing for a car through a dealership should never affect your credit score as it merely requires a soft pull credit score inquiry.
How To Minimize The Number Of Hard Inquiries You Have
Hard inquiries aren’t bad to have even if they may cause a slight temporary dip in your credit scores but it can be good practice to know how to minimize the number of inquiries on your credit report.
Below, CNBC Select rounded up some general guidelines to keep track of your hard inquiries:
- Don’t apply for several credit cards within a short timeframe. Experts generally recommend only applying for a credit card every six months.
- Only apply for credit cards you would actually benefit from using.
- Make sure you check your credit score beforehand . You can do so for free with most card issuers, using apps such as Discover’s Credit Scorecard and Chase’s Credit Journey .
- Before applying for a credit card, shop around with prequalification tools, which allow you to check your likelihood of qualifying for a card without damaging your credit.
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How Long Do Hard Inquiries Remain On Credit Reports
Consumers benefit from being able to see who accessed their credit reports, and when. Hard inquiries can remain on your credit reports for as long as two years, but, from a credit scoring perspective, hard inquiries are only a factor if they are less than 12 months old.
FICO® and VantageScore credit scoring systems will not consider hard inquiries once they have become 12 months old. As such, while hard inquiries may remain on your credit reports for 24 months, they cease to have any influence on your credit scores during months 12 to 24, if they even had any influence in the first place.
While it is important to understand the inquiries that appear on your credit reports and how they can influence your credit scores, it’s also important to keep their relevance in perspective. Some hard inquiries will lower your credit scores some hard inquiries will not.
Ways To Help Manage Hard Credit Inquiries
When you know what can trigger hard inquiries, you may be able to better manage their impact.
Here are some other tips to help you manage hard inquiries on your credit:
is another easy way to monitor your credit. With CreditWise, you can stay on top of your VantageScoreÂ® 3.0 credit score and TransUnion credit report for freeâeven if youâre not a Capital One customer. With the CreditWise Simulator, you can even explore the potential impact of your financial decisions before you make them.
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Getting Hard Inquiries With Strong Credit
If your credit score sits around the high 600s or low 700s, every point for you counts. A few small decreases of 5 to 10 points can put you in a position where you cant get loans or the loans you get are much less favorable for you. However, having hard inquiries on your account when you have strong credit is much easier to handle. This is why its important to do everything you can to build strong credit so you can take these hits. Losing 5 to 10 points on a good score really wont affect you that much. Your lender will see these hard inquiries as just a consequence of you seeking a loan instead of you being desperate or untrustworthy. Lets dive into some of the things you can do to help build strong credit.
How To Protect Your Credit Score When Applying For Credit
Theres no need to be afraid of applying for credit. Follow these strategies to keep your score in top shape:
- Watch out for surprising hard inquiries. Obviously applying for a new car loan will generate a hard inquirybut other, less apparent actions can also result in hard inquiries. For example, lenders generally submit hard inquiries when you request a credit limit increase, and rental car companies may also submit a hard inquiry if you pay with a debit card.
- Think ahead. When youre applying for a major loan, every point on your credit score could make a meaningful difference in the amount of interest youll pay. Consider holding off on other credit applications in the preceding months to protect your score from unnecessary hard inquiries.
- Stay within the window. Make sure all rate shopping is completed within a short timeframe.
- Take advantage of soft inquiries. Many online lenders allow you to check your rates or see estimated loan offers with just a soft inquiry, enabling you to gather information without hurting your credit score. Be sure you know which type of inquiry will be submitted before providing any personal details.
- Monitor your credit report. Use Upgrades Credit Health tool to regularly watch your credit profile, and periodically check your credit reportavailable from each major reporting agency once a year for free. If you spot an unauthorized hard inquiry, you can file a dispute with the reporting bureau.
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Should You Be Worried About Hard Inquiries
If this question – How much does a hard inquiry affect credit? – still wakes you up at night, you should know that hard credit inquiries account for the smallest percentage of your overall credit report. In the FICO scoring model, only 10% of your credit score is reserved for hard pulls. In most cases, its less than 10%. VantageScore is also flexible when it comes to hard inquiries. Altogether, they are not an essential category in the total score.
Of course, it doesnt mean you should be less cautious with hard inquiries. Multiple hard inquiries in a short period can impair your credit. If youve just got a personal loan and plan to apply for a mortgage, expect another hard inquiry. The points on your credit score will drop for a few more, and you might have difficulties qualifying for better rates. To avoid this situation, you might consider applying to lenders who offer loans without hard credit checks.
When Can Businesses Request Your Credit
The Fair Credit Reporting Act requires businesses to have an acceptable reason for accessing your credit report. Acceptable reasons include:
- To grant credit. If you’ve applied for a credit card, loan, or other credit-based services, the business has permission to access your credit report to determine whether you qualify.
- To collect a debt. Debt collectors can use your credit report to obtain information, like your address or place of employment, that would help them collect a debt.
- To underwrite insurance. Some insurance providers use your credit score to gauge the likelihood that you will file a claim.
- For employment. Current and prospective employers may check your credit report before hiring you for certain positions, especially financial and upper-level management positions.
- To issue certain government licenses.
- For legitimate business transactions.
Companies that access your credit report under false pretenses or those who use it illegally are violating Federal law. You may be able to sue a company that violates your rights.
A Hard Credit Inquiry Can Have A Negative Effect On Your Credit Score
A hard credit inquiry occurs when a lender or company reviews your credit score as part of a loan application process. When you apply for a mortgage, loan, or credit card, you give the lender permission to check your credit.
If you already have an extensive credit history, the effect is minimal. But if you have a short credit history or a few accounts, the impact is greater. Hard inquiries may stay in your credit history for up to 36 months, but no more than two years.
While hard inquiries might not affect your credit score for long periods, it is important to space out the inquiries. Multiple hard inquiries within a short period make you look like a high-risk customer, so lenders might think youre short on cash or looking to acquire debt. If youre looking to build your credit score, youll want to space out your inquiries, so you dont seem unreliable.
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Learn How Credit Inquiries Can Impact Your Credit And Whether Theres Such A Thing As Too Many Inquiries
First things first: Thereâs no definitive answer to the question âHow many credit inquiries is too many?â Why? Because there are two different kinds of . And while one of them doesnât affect credit scores, the other one does. Soft inquiries are simple reviews of your credit file and existing accounts that donât impact your credit scores. But hard credit inquiries can have an impactâand theyâre triggered whenever you apply for credit.
Read on to learn more about credit inquiries, how they can affect your scores and what you can do to manage their impact.
Find A Lender To Secure The Funding You Need
If you are worried about lenders pulling your credit and affecting your score, let Lendio help. We can help you find willing lenders who offer favorable rates so you dont have to meet with multiple banks or credit companies. By starting your relationship with the right bank, you can limit the number of hard inquiries that come with shopping around for loans.
Visit our online loan center to learn about your business financing opportunities.
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How Does A Hard Credit Check Affect My Credit Score
Hard credit checks could have a temporary, negative impact on your credit score for example, having multiple hard credit checks in a short period of time on your credit report can raise concerns for lenders. This is important to remember when youre shopping for the best rate on a personal loan or credit card.
Hard credit checks are only one of the five factors that make up your credit score. Other factors such as payment history, credit utilization ratio , mix of credit types, and length of your credit history all factor in to your credit score. You can find more helpful information about understanding your credit score here.
How Many Points Does A Hard Inquiry Affect Your Credit Score
In general, hard inquiries dont have as much of an impact on your credit score as other credit factors. Credit inquiries are only responsible for 10% of your credit score while your payment history makes up 35% of your score.
For most people, according to FICO, a new hard credit inquiry will only drop your credit score between one and five points. While a hard inquiry stays on your credit report for two years, it only impacts your score for one year.
Its important to note that these inquiries can stack up. For example, if you get a new mobile phone and service plan in January and then apply for a new credit card in February, you may see a bigger hit to your credit score than just five points due to multiple hard inquiries.
However, there is a way around racking up multiple hard inquiries if youre rate shopping for a loan or mortgage. Heres how.
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How To Reduce The Impact Of Hard Inquiries On Your Credit
Hard inquiries on their own generally aren’t enough to significantly reduce your score in a lasting way. This is especially true for those who have a positive credit history. In most cases, hard inquiries result in a temporary credit score drop that rebounds within a few months.
Improving your credit score is one of the best ways to cushion the blow of hard inquiries. To do this, focus your attention on the following areas:
- Always make on-time payments across all your accounts.
- Pay down your debt and keep your below 30% the lower, the better.
- Pay off any past-due accounts, including collections or charge-offs.
- Periodically check your credit report and credit score and pay close attention to the risk factors included with your score.
- Apply for credit only when you need it.
Get Your Full Credit Picture In One Spot
Nav brings your personal and business credit together in one FREE account so you can monitor your full credit picture.
Shopping for credit can be smart. But it can also affect your credit scores. If you are someone who takes the time tomonitor your credit report and scores, losing a few points can be stressful.
There are benefits to maintaining a high credit score. Youll often get approved for credit faster and easier, and you can qualify for the best interest rates, including zero percent offers. That means you can borrow money cheaply, or even free. You may also be in a better position to negotiate a price on, say, a home or car if you have a high credit score.
To keep you from losing sleep over losing points, weve created this quick guide to help you understand hard inquiries and their impact on your scores. So here goes:
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