Carefully Plan Your Hard Inquiries
Dont start applying for credit until youre serious about it, then you can stick to this time frame.
If you are shopping around, youll start to have separate hard inquiries stack up on your credit reports when they are spread out over time. It always helps to have a financial goal with a deadline so you can plan your inquiries in advance.
If youre not applying for too many types of credit at the same time, then you probably wont have to worry about disputing inquiries you can just leave them alone.
However, if you have several different types of inquiries, you may want to consider disputing them because they can add up as lost points. And if your credit score is borderline between two scoring categories, then every few points can make a difference.
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.
Exceptions To The Impact On Your Credit Scores
If you’re shopping for some types of loans, such as a mortgage loan, multiple inquires for the same purpose within a certain period of time are generally counted as one inquiry. The timeframes may vary, but range from 14 days to 45 days, depending on the credit scoring model being used. All inquiries will show on your credit reports, but generally only one within the specified period of time will impact your credit scores. This exception does not apply to credit cards.
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How Hard Inquiries Work
When you apply for a new loan such as a mortgage, car loan or personal loan, the lender has you complete an application and asks for your permission to check your credit score. The lender uses your information to check your credit and see your borrowing history and how well youve managed loans and credit cards in the past.
Even if you dont take the loan , the inquiry remains on your credit application. This, in turn, can absolutely affect your credit score. In fact, too many inquiries in a short time even if they all result in a new, responsibly used loan will lower your credit score.
When you apply for multiple loans in a short period of time, lenders become concerned. The more inquiries you have, the more you are presumably borrowing or the more you need to borrow. Opening multiple accounts in a short amount of time makes it look like you are stretched thin financially and need more cash on hand. This is why multiple hard inquiries will ding your credit, at least for a while.
Your credit score does understand the nature of healthy borrowing, however. If you are shopping for a new loan with multiple lenders, each lender will check your credit in a hard inquiry. The credit bureaus, however, will not consider each of those inquiries separately if they are for the same type of credit in a very short period of time.
How Many Hard Inquiries Is Bad
Having a long, consistent history of hard inquiries is not great if you expect to apply for more loans in the future. However, if you are shopping around for loan options, the credit bureaus see this as one event. Depending on the credit bureau, a series of hard inquiries within a 14- to 45-day timeframe will generally be considered as one hard pull.
If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report, FICOreports. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage, or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on your credit scores.
Hard inquiries will likely remain on your credit report for as long as 2 years. After 1 year, it no longer impacts your credit score.
There is no benchmark for when you have too many hard inquiries, but think about patterns of behavior. If you apply for new credit cards every 2 months for a year, for example, lenders might question your creditworthiness.
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Soft Inquiries Or Soft Credit Pulls
These do not impact credit scores and dont look bad to lenders.
In fact, lenders cant see soft inquiries at all because they will only show up on the credit reports you check yourself . A soft inquiry happens when there is no credit decision being considered. For example, its a soft inquiry when you check your own credit report or an existing lender checks your credit in a context where youre not applying for new credit .
The next time you get a copy of your , look for the section labeled requests for credit history or something similar. This part of the report will list the names of all of the companies that have recently requested a copy of your credit report.
Equifax, like Experian and TransUnion, used to count phone and internet service inquiries as hard inquiries. But, effective April 6, 2020, inquiries on Equifax credit reports for wired and wireless phone, internet, and pay TV accounts can be counted by service providers as soft inquiries. By June 30, 2020, Equifax will automatically classify those new accounts as soft inquiries.
What Is The Key To A Favorable Credit Inquiry
Understanding the role of credit is important if you plan to buy a home. Share your concerns with your lender and remember your credit report is only one of many factors lenders consider when reviewing your mortgage application. When you’re ready to apply for a mortgage, talk to a Home Lending Advisor about your options.
Credit inquiries play an important role for buyers and lenders alike, and they can make all the difference regardless of if you’re a first-time homebuyer or an experienced property owner.
The key to a successful credit inquiry is understanding how they work and how they impact your credit score. Below are answers to some of the most common questions about credit inquiries and how you can help make your next inquiry a favorable one.
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How Credit Scores Are Affected By Hard Inquiries
When a hard inquiry is reported, be aware that you may see a minor decrease in your credit score. This decrease will last for about a year.
If you are in the market for a car or house and need to shop around for favorable loan terms, you should focus on keeping your inquiries within a 30-day time frame. All inquiries during this time frame will count as one, having a minimal impact on your score.
You may see a 1 to 5-point reduction in your score. However, continuing to pay on time and maintaining your good credit will result in a bad credit score increasing into the good territory over time.
Monitoring your credit utilization and refraining from obtaining new credit are other tactics to mitigate the effects of hard inquiries on your credit score.
I have found the point reduction to be minute in comparison to the decline in my score due to an increase in my credit card balance. With an inquiry requesting information on a car refinance, I saw a drop of two points. With the credit card balance increase, there was a on my report.
How Rate Shopping Affects Your Credit Score
The FICO score ignores all mortgage and auto inquiries made in the 30 days before scoring. If you find a loan within 30 days, the inquiries wont affect your score while youre rate shopping.
The credit-scoring model recognizes that many consumers shop around for the best interest rates before purchasing a car or home, and that their searching may cause multiple lenders to request their credit report. To compensate for this, multiple auto or mortgage inquiries in any 14-day period are counted as just one inquiry.
In the newest formula used to calculate FICO scores, that 14-day period has been expanded to any 45-day period, Watt said.
This means consumers can shop around for an auto loan for up to 45 days without affecting their scores.
If youre wondering how to get the most bang for your buck while rate shopping, a nonprofit credit counselor can help walk you through the process. The advice is free and can save you from committing a costly error while perusing over various rates.
To sum things up, soft inquiries have no effect on your credit score. They happen all the time without your knowledge, so dont worry about them. A single hard inquiry will go mostly unnoticed by the credit bureaus. Any damage done will mend itself in a couple months.
However, if you make too many hard inquiries in a short enough period of time, your credit score will plummet.
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Summary Of How To Check Credit Inquiries
If you check credit inquiries on a regular basis, you have a better way of maintaining a high credit score. Even if you dont apply for new credit often, you should still check the number of credit inquiries on your credit report at least once a year.
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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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Fraudulent Account Inquiries & Credit Applications
Lastly, if youre making payments on time, lowering your credit utilization, and youve cleared up any mistakes and your score is still looking pretty sad, there could be a possibility of fraud on your account. If your personal information has been stolen, scammers may be opening new accounts in your name without your knowledge. These accounts are neglected, often over-utilized and never paid off, which has a terrible impact on your credit score. Plus, each time a new account is opened, youll have a hard inquiry drop your credit score a few more points. However, you will be able to see all open accounts on your detailed credit history report. If youre checking for mistakes every year, which you should be, you most likely already saw some lines of credit that you dont recognize. It is also possible to dispute having too many hard inquiries on your credit report.
Having multiple hard inquiries in a short time could drop your credit score. While credit unions will recognize if you are shopping around for a car, its better to not have too many inquiries in quick succession. If you suspect fraud or dont understand why your score isnt improving, it may be time to consider credit repair services.
For more letter templates and disputing items on your credit report, visit our dispute letter resource center.
How Do Credit Inquiries Affect Your Credit Scores
Now you know that hard credit inquiries can have an impact on credit scores. But you might be wondering how.
According to credit-scoring company FICO®, a hard inquiry can cause your credit scores to dropâusually by just a few points. Hard inquiries can stay on your credit reports for up to two years. But they might only affect your scores for a year.
Why would a hard credit inquiry cause a drop in credit scores? As the Consumer Financial Protection Bureau explains, credit-scoring models generally look at how recentlyâand how oftenâyouâve applied for credit. So a single hard inquiry may have a relatively minor impact on your scores. But multiple hard inquiriesâespecially multiple hard inquiries over a short period of timeâcould have more of an impact.
Hard inquiries can also have more of an impact on your scores if you have few accounts or a short , according to FICO.
Ultimately, as FICO explains, âThe impact from applying for credit will vary from person to person based on their unique credit histories.â
Keep in mind: Credit-scoring companies use different formulas, or models, to calculate credit scores. And there are many different credit scores and scoring models. Some credit scores even use different ranges. That means people may have more than one score out there.
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Plan Before Shopping For A Loan
Before shopping for a loan, it’s always smart to proactively plan your finances.
First, learn whether the type of credit you’re applying for can have its hard inquiries treated as a single inquiry. If so, determine the applicable timeframe. Then you can plan your shopping period accordingly.
Second, you may also want to check your credit reports before getting quotes to understand what information is reported. Find out how to request a free credit report from Equifax.
If you’re worried about the effect that multiple hard inquiries may have on your credit reports, it may be tempting to accept an offer early rather than allow multiple hard inquiries on your credit. However, consider your individual situation carefully before cutting your shopping period short. In many cases, the impact hard inquiries have on your credit scores from shopping around will likely be minimal compared to the long-term benefits of finding a loan with a lower interest rate. The more informed you are about what happens when you apply for a loan, the better you can prepare for the process before you start shopping.
How To Remove Hard Inquiries
You should check your credit reports from all three credit bureaus regularlyat least once each yearwhich you can do for free at AnnualCreditReport.com. You can also check your Experian credit report for free anytime. One thing to look for is any hard inquiry you don’t recognize. Unexplained hard inquiries, while rare, can lower your credit scoresbut more importantly, they can be signs of criminal activity.
If you see a hard inquiry you don’t recognize, reach out to the creditor in question, using the contact information included in your credit report. Suspicious inquiries aren’t always connected to illegitimate activity: An unfamiliar creditor may turn out to be the lending partner of a retailer where you applied for a credit card or a dealership where you applied for an auto loan, for instance.
If you confirm a hard inquiry is connected to fraudulent activity such as someone applying for credit with your information, take these steps:
- Report it to the appropriate law-enforcement agencies.
- Consider protecting your credit reports with a fraud alert or security freeze.
- Dispute the inquiry to have it removed from your credit report.
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Why Credit Inquiries Could Hurt Your Credit Score
The type of credit inquiries you have could impact your credit report and credit score. For example, a hard credit inquiry could reflect negatively, and may even bring your overall credit score down.
This is because those who have recently applied for a new loan and/or additional credit can be viewed as a more risky borrower. This is particularly the case if you already carry large loans or credit balances.
Hot Tip: In most instances, a hard credit inquiry will remain on your credit report for up to 2 years. However, there are instances where negative information may remain on your credit report for 7 to 10 years.
How To Remove Inquiries From Your Credit Report
Because inquiries on your credit report can cause your credit score to drop a bit, you might be inclined to remove them. However, hard inquiriesthose that are made because you applied for more creditcan not be removed unless they are inaccurate or fraudulent.
Since hard inquiries have only a small effect on your credit score and they go away after two years, you shouldn’t waste your time trying to get them taken off your report. The wiser action is to limit the number of credit applications you make over a short period of time.
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Dispute By Mail Or Phone
It’s fast, free and easy to manage a dispute online, but if you’d prefer to dispute by mail or phone you’ll find instructions below.
To complete a dispute by mail, provide as much of the following information as possible:
- Personal Information: Name, DOB, Address, SSN
- Name of company that reported the item youre disputing and the partial account number
- Reason for your dispute
- Any corrections to your personal information
Send your documents to:
Please note: We accept either standard or certified mail.