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.
Consequences Of Changes To Your Credit Report
Prior to the passage of the CARD Act in 2009, credit card issuers would routinely increase customers credit card interest rates to the default rate if the customer had late payments on any account on their credit reports. This rate increase was often triggered even if the late payments occurred with another lender entirely and not with the credit card issuer itself. This practice was known as universal default.
The CARD Act did limit retroactive rate increases, but you would be mistaken if you believe that the practice of universal default has been completely eliminated. In fact, a credit card issuer can still impose a retroactive rate increase, but it can now only be imposed if the customer has missed payments with the card issuer directly.
Even though credit card issuers are more limited regarding universal default practices, there are plenty of other adverse actions which are still allowed whenever a customer has negative activity appear on his or her credit reports. Customers who miss payments with another, unrelated lender could still face consequences such as lower credit limits, increased interest rates on future purchases, and even account closings.
Naturally, the best way to protect yourself from universal default clauses and other adverse actions from your credit card companies is to always pay your bills on time, and in general never revolve a balance on your credit cards from one month to the next.
How Long Do Hard Credit Inquiries Stay On Your Credit Reports
Hard inquiries may stay on your credit reports for up to two years. However, hard inquiries that are more than a year old might not affect your scores.
As Equifax®, one of the three major credit bureaus, explains, âHard inquiries serve as a timeline of when you have applied for new credit and may stay on your credit report for two years, although they typically only affect your credit scores for one year.â
FICO confirms that this is how their credit scores work: âAlthough FICO Scores only consider inquiries from the last 12 months, inquiries remain on your credit report for two years.â
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Is There A Place Where I Can Explain Some Of The Negative Information On My Credit Report
Absolutely. You have the right to attach a 100-word explanation , called a consumer statement, to your credit report. It can be used to explain why, for example, you have a few late payments on your report. Anyone who looks at your credit report will see this statement. You can add your consumer statement online.
Hard Vs Soft Credit Pulls
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| Yes | Yes |
Because hard pulls have the ability to affect your credit standing, you need to give explicit permission for anyone to make a hard credit pull. Actions sometimes count, though. By applying for a credit card, for instance, youre giving the issuer permission to confirm you meet the cards approval requirements. And that requires a hard credit pull. But no one can just do a hard pull without your knowledge. If you see an unauthorized inquiry bringing down your score, you can dispute it.
Soft pulls dont require permission, but the puller needs to have a legitimate reason. For example, lenders generally use soft pulls to pre-approve people for credit card offers. So no need to worry about random strangers snooping around your private info.
For more information, we suggest reading WalletHubs article on soft vs. hard credit inquiries.
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Can Hospitals Check Your Credit Without Your Consent
Lets set the scene here. A health issue comes up, requiring you to spend some time in the hospital. By the end of your stay, you are left with a hefty balance. You have health insurance, but it has a high deductible that you have not yet met. Once you reach that deductible, the insurance will kick in, but until then, its on you.
Problem is, you cant afford the deductible. The hospital then informs you that it has a new program that pairs you with a loan vendor and sets up a payment plan for you to cover your costs. The hospital pre-screens your credit reports before sending you to the loan vendor who ultimately decides whether to approve the loan or not.
Sounds like a solution to your problem? But does the hospital have to let you know that they are checking your credit information? And does the hospital need your approval for checking your credit? Also will this put a blemish on your credit report?
A soft hit on your credit score
What the hospital is doing here is what is referred to as a soft hit on your credit. The hospital may want to run a soft hit on your credit score in order to pre-screen you for this payment program. This is similar to what happens when you get a credit card offer in the mail. The credit card company soft pulls a large number of consumers credit reports to pre-screen who they want to mail an offer to. Similarly, the hospital may want to soft pull your credit report before sending you to the lender.
How To Handle Unauthorized Hard Inquiries
Here are a few steps you can take to address unauthorized hard credit inquiries:
- Contact the company directly. It could be that the company making the inquiry simply did so in error. Mistakes on credit reports are not uncommon. One congressionally mandated study from the Federal Trade Commission showed that 20% of consumers had an erroneous entry that showed on at least one of their three credit reports.
- Notify the and dispute the inquiry. If your credit was run in error or without your authorization, you have the right to ask the credit bureau in question to delete the inquiry from your credit file. You may need to file a dispute with the credit bureau, as well as with the company that provided the information on the inquiry. The CFPB has sample letters and instructions consumers can use for each.
- Submit a complaint to the CFPB. The CFPB has handled more than 1 million complaints and states a 97% success rate in getting timely responses to consumers from financial companies through its complaint-reporting system.
- Regularly check your credit report. Thanks to the Fair Credit Reporting Act , consumers are entitled by law to get a free copy of their credit report from each of the three major credit reporting companies once every 12 months . There are also credit monitoring programs that keep a lookout for any changes to your credit reports and identity theft protection services that monitor the internet for personally identifiable information, typically for a monthly fee.
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Errors On Your Credit Report
If you find errors on your credit report, write a letter disputing the error and include any supporting documentation. Then, send it to:
Find a sample dispute letter and get detailed instructions on how to report errors.
The credit reporting agency and the information provider are liable for correcting your credit report. This includes any inaccuracies or incomplete information. The responsibility to fix any errors falls under the Fair Credit Reporting Act.
If your written dispute does not get the error fixed, you can file a complaint with the Consumer Financial Protection Bureau .
Banks And Credit Card Companies
Banks and companies make a profit by loaning money to consumers and then collecting interest on the loan amount. When you apply for a loan or credit card, your lender reviews your credit record to determine how likely you are to repay your debt responsibly. The lender then assigns you an interest rate based on your risk level via a process known as price-based risk assessment.
Your credit report contains all the information your lender needs to conduct a price-based risk assessment. Although many lenders will ask you for your permission before pulling and reviewing your credit report, they are not legally required to do so.
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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.
Top Sources For Free Credit Scores
InvestopediaForbes AdvisorThe Motley Fool, CredibleInsider
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
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So How Many Times Can You Pull Credit For A Mortgage Without It Impacting Your Credit Score
There are two main credit scoring models, FICO and VantageScore, and different lenders choose whatever model they prefer.
Newer versions of FICO score offer homebuyers a 45day window for rate shopping. Whereas older versions of FICO and VantageScore 3.0 narrow that period of time to only 14 days.
So its important to speak with your lender about the credit scoring model theyre using.
But if youve yet to decide on a mortgage lender, it may be best to take a conservative approach and keep rate shopping to two weeks, rather than 45 days.
Combining Multiple Inquiries For Credit Cards
The shopping around logic that combines multiple inquiries for auto, mortgage, and student loans is not designed to work for credit cards.
With installment loans, even though you may be approved for the loan, you still have the option of choosing whether or not you want to accept the loan and take delivery of the money. You will probably not open all the accounts, so multiple inquiries can be collapsed into one.
Sometimes, however, if you apply for multiple credit cards with the same issuer in a short period of time, you may only end up with one inquiry on some or all of your credit reports. This is not because the issuer is combining the inquiries and only pulling your credit once. Instead, the credit bureaus see that you have multiple inquiries that look exactly the same, because theyre from the same issuer on the same day. Since the credit bureaus want to avoid duplicate information and the inquiries look identical, they may only count one of them.
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How Do I Fix My Credit
First, understand that if you wish to increase your score, credit cleanup isnt a quick fix. Credit repair takes time and patience. If youve missed multiple payments in a row, a one on-time payment wont make up for that, according to our experts. It takes time to rebuild credit and clean up bad credit reports, especially if youre trying to pay off debts, but the good news is: youre not alone and you arent doomed.
But thanks to the Fair Credit Reporting Act, the bureau have 30 days to respond to your dispute and remedy the mistake if they verify that an unauthorized inquiry is, in fact, a mistake. However, that doesnt mean you should just assume your credit scores will improve after that time. Its a good idea to keep an eye on your credit to see the effects of your dispute.
If, for whatever reason, the hard inquiry is deemed not a mistake, then know your credit score isnt greatly impacted. A single inquiry should only drop your score by only five points or less, if it affects your score at all.
We think the key to fixing your credit is simple: keep track of your finances. Start with a spreadsheet and keep a running tab of your incoming money, your outcoming expenses, your debt, and your ongoing payments, so eventually you can raise your credit score above the national average which is the highest its ever been at 699.
Can I Rent A House With A 580 Credit Score
If you a 580 credit score, you could qualify for an FHA loan with just a 3.5% down payment. Having good scores will make the process of renting simpler. A good credit score is considered to be 700 or higher. However, if you have poor credit and believe your only option is to rent, you may be able to buy.
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Whats On My Credit Reports
Your credit reports contain personal information, as well as a record of your overall . Lenders and creditors report account information, such as your payment history, credit inquiries and credit account balances, to the three main consumer credit bureaus. All of that information can make its way into your credit reports.
Much of whats found in your credit reports can impact whether youre approved for a credit card, mortgage, auto loan or other type of loan, along with the rates youll get. Even landlords may look at your credit when deciding whether to rent to you.
Lets dig into some of the main components of your credit reports.
Personal InformationThe personal information you might find on your credit reports includes your name, address, date of birth, Social Security number and any jobs youve held.
The credit bureaus use this personally identifiable information to ensure youre really you, but it doesnt factor into your credit scores. In fact, federal law prohibits credit scores from factoring in personal information such as your race, color, gender, religion, marital status or national origin.
That being said, its not necessarily true that the American financial system is unbiased or that credit lending and credit scoring systems dont consider factors affected by bias. To learn more about racial justice in lending and initiatives seeking to create change, connect with organizations leading the fight, like the ACLU.
Should I Dispute The Inquiry
Returning to the example of our commenter, we should verify that she is seeing a hard inquiry affect her score and not just the report of a soft inquiry. When checking your credit reports, you will see them in different columns. Someone pulling a credit report without authorization happens more often that you may think. If it is a confirmed hard inquiry, and if our commenter does decide to dispute the inquiry, she has a few options. Disputing errors on your credit report is something you can do on your own, or you can turn to a professional credit repair agency for help. Either way, these are the four steps a dispute requires:
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Fixing Errors In A Credit Report
Anyone who denies you credit, housing, insurance, or a job because of a credit report must give you the name, address, and telephone number of the credit reporting agency that provided the report. Under the Fair Credit Reporting Act , you have the right to request a free report within 60 days if a company denies you credit based on the report.
You can get your credit report fixed if it contains inaccurate or incomplete information:
- Contact both the credit reporting agency and the company that provided the information to the CRA.
- Tell the CRA, in writing, what information you believe is inaccurate. Keep a copy of all correspondence.
Some companies may promise to repair or fix your credit for an upfront fee–but there is no way to remove negative information in your credit report if it is accurate.