Whether you’re applying for credit or checking your own credit report, a credit inquiry will be generated. But it may or may not impact your credit score. Read on to learn more about the key differences between the two types of credit inquiries and how they impact your credit report.
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What are Credit Inquiries?
Credit inquiries are generally classified into two types:
- Soft credit inquiries: If you check your own credit report, a creditor approves you for a credit offer or a current creditor you do business with reviews your credit profile, a soft credit inquiry will be generated. Soft credit inquiries can also result from checks initiated by utility companies to determine if you pose a credit risk and need to make a security deposit to protect their interests or auto insurance companies when deciding how much to charge you for premiums.
- Hard credit inquiries: They are referred to as hard credit pulls and result from credit applications. When you apply for credit, the lender usually pulls one or more of your credit scores from the three credit bureaus – Experian, TransUnion or Equifax – and uses it, along with your credit report, to determine the likelihood of default on the credit card or loan product. You may also notice a hard inquiry on your credit report if you apply for a credit limit increase and the credit card issuer opts to do a hard inquiry instead of a soft pull.
How Do Credit Inquiries Affect Your Credit Report?
Soft Inquiry
Soft inquiries have no impact on your credit score. So, you can check your credit score as often as you’d like. And there’s no need to worry about those pre-approved offers for loans or credit cards you receive in the mail and if they’ll hurt your credit score if you’re not planning to apply for any of them. But if you decide to take a credit card issuer or lender up on their offer, a hard inquiry will be generated when you move forward with a credit application.
Hard Inquiry
Hard inquiries can drop your credit score by between two and five points. The good news is the impact is only temporary, and your score should start to improve within a few months.
Keep in mind that several inquiries in a short window could mean bad news for your credit score. However, an exception applies if you’re shopping for an auto loan or mortgage within a 14- to 45-day window, thanks to rate shopping that groups several inquiries into one.
How Long Do Inquiries Stay on Your Credit Report?
Soft Inquiry
As mentioned above, soft inquiries have no bearing on your credit score. So, no need to concern yourself with them lingering around and damaging your credit rating.
Hard Inquiry
Hard inquiries stay on your credit report for up to two years. However, the impact diminishes with time, usually within a few months.
Why Your Credit Report Matters
It’s not uncommon for consumers to focus on their credit scores instead of what’s in the credit report, and for a valid reason. Your credit score is the three-digit number lenders, and creditors use to determine if you’re eligible for credit cards and loan products, along with the terms you’ll receive. In many instances, credit scores are also used by landlords to decide if they should approve or deny your application for an apartment, condo or rental home. And some insurance companies set coverage costs based on this number.
Still, ignoring your credit report isn’t a smart move as the information in it is used to calculate your credit score. Below is a breakdown of how your FICO score, which is used by 90 percent of lenders and creditors to make decisions, is determined:
- Payment history (35 percent)
- Amounts owed (30 percent)
- Length of credit history (15 percent)
- Credit mix (10 percent)
- New credit (10 percent)
So, it’s vital to review your credit report regularly to ensure it’s free of errors and file disputes promptly if needed. Otherwise, it could contain information that’s dragging your credit score down. It’s equally important to identify any negative items and take action to remedy them.
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Can You Dispute Credit Inquiries on Your Credit Report?
Yes, you can dispute credit inquiries or any other inaccurate information on your credit report by reaching out to the three major credit reporting agencies – Experian, TransUnion and Equifax. The contact information is listed below:
Experian
By mail:
- Experian
- P.O. Box 9701
- Allen, TX 75013
Online:
By phone:
- Call the number listed on your credit report. If you don’t have it handy, call 866-200-6020 to have a copy mailed to you.
TransUnion
By mail:
- TransUnion Consumer Solutions
- P.O. Box 2000
- Chester, PA 19016-2000
Online:
By phone:
- (800)-916-8800
Equifax
By mail:
- Equifax
- P.O. Box 740256
- Atlanta, GA 30374-0256.
Online:
By phone:
- Not applicable
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