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.
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 there is no need to concern yourself with them lingering around and damaging your credit rating. Soft credit checks can stay on your credit report for up to two years.
Hard Inquiry
Hard inquiries stay on your credit report for up to two years. However, their impact diminishes with time, usually within a few months. You won’t have as many hard credit checks showing up on your report if you apply for several types of loans within a 14-45-day time frame.
Factors Contributing to the Duration of Inquiries on Your Credit Report
Some hard pulls will stay on your credit report longer. These are the key factors that influence how long a recent credit check will impact your credit score.
Multiple Inquiries for the Same Type of Loan
Most of these loans will stay on your credit report for 12 months. Some can remain on your credit report for up to two years, but a hard credit check only affects your credit for the first year.
The Impact of Shopping Around for Better Rates
Many people apply for the same type of loan multiple times at different financial institutions to compare rates. This is a popular practice for people seeking mortgages and car loans.
Credit scoring agencies understand that borrowers aren’t looking to take out all of those loans but want to find the best loan for them. All of that activity only gets treated as one hard credit check instead of several if it takes place within 14-45 days.
A hard credit check on the 46th day gets treated as its own event. However, this rule does not apply to new credit cards. If you apply for student loans and a new credit card, you will end up with two separate credit inquiries. You will also end up with six hard credit checks if you apply for six credit cards within a short period of time.
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 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.
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
How to Dispute Unwarranted Inquiries on Your Credit Report
You will accrue credit inquiries as you apply for loans, but some people become victims of identity theft and have unwarranted credit checks. Here’s how you can dispute those inquiries to the major credit bureaus.
Understanding Unauthorized Items
Unauthorized items are usually the result of identity theft. Your credit report may display financial products that don’t make sense for your credit profile, such as a loan that you don’t remember applying for. It’s also possible that the credit scoring company made an error and is displaying inaccurate information that you can quickly dispute with evidence.
Steps in Disputing Incorrect Inquiries
You can follow these steps to dispute any incorrect credit inquiries.
Step 1: Review a free copy of your credit report
Step 2: Detect any items that you find suspicious
Step 3: Write a letter explaining the error and provide evidence
Step 4: Send your information to one of the major credit bureaus
Seeking the Help of Credit Experts
Credit experts can help you navigate various challenges, such as managing debt and filing disputes. You can have a professional write the letter and send it to the appropriate credit bureau. Most bureaus respond to dispute letters within 30 days.
Experts like The Credit Pros, with their personalized solutions and expert advice, can help you develop a strategic plan to address any credit inquiries and improve your overall financial situation.
The Credit Pros offers fast and effective results, easy-to-read credit reports, and personalized strategies to help you rebuild your credit. With their 100% 90-day money-back guarantee and affordable pricing with no long-term contracts, you can trust that they are committed to helping you succeed. Contact The Credit Pros today for a free consultation with no obligation to sign up. Call (727) 306-8201 or fill out a form to start improving your credit score and achieving financial stability.
Conclusion: Minimizing the Effects of Credit Inquiries on Your Credit Report
Many creditors use hard credit checks to assess if you can keep up with additional loan or credit card payments. It’s a standard procedure, but your credit score will take a hit if you get a hard credit inquiry.
Looking for financing opportunities that offer soft credit inquiries is one of the ways you can keep your credit score safe. You can also minimize the impact of credit inquiries by staying on top of your finances and not applying for too many loans and lines of credit. Minimizing the impact of credit inquiries on your credit report can give you the capital you need while keeping your credit score in a good position.
FAQs About Credit Inquiries on Credit Report
Both credit scoring models are lenient with hard credit inquiries. You will only lose a few points, and it has a minimal impact on your score.
Your credit information will improve if you remove inquiries. However, you can only remove inaccurate items, and the improvements aren’t significant. Most credit inquiries from mortgage loans and similar products stop impacting your score after 12 months.
