There are multiple factors that affect your credit score such as errors on credit report, not using credit cards, the length of credit history, types of credit in use, credit inquiries, and so on.
So, today, let’s discuss credit inquiries and their impact on credit score.
What is a credit inquiry?
When a creditor, an employer, or a financial institution requests to check your credit report before giving you a loan, employment, or a credit card, is known as a credit inquiry.
Whenever a creditor pulls your credit report, it gets reported and stays in your reports for 2 years.
Types of credit inquiries
There are two types of credit inquiries:
- 1 Hard inquiries
- 2 Soft inquiries
What is a hard inquiry?
It happens when you apply for a credit card, mortgage, auto loan or other loans. Basically, they check whether or not you’re creditworthy.
It may affect your credit score by few points and stays there on your credit report for 2 years.
What is a soft inquiry?
For instance, soft pulls occur when employers check your credit report before giving you a job, or when you check your own credit report.
Soft inquiries don’t affect your credit score and may happen without your knowledge.
|#||Criteria||Hard Inquiries||Soft Inquiries|
|1||Applying for auto loan, student loan, business loan or personal loan|
|2||Applying for credit card|
|3||Applying for mortgage|
|4||Applying for car or homeowners insurance|
|5||Checking own credit report|
|6||Pre-approval of credit card|
|7||Landlord or rental management company requesting credit score and credit history during tenant screening process|
|8||Landlord or rental management company confirming identity|
|9||Identity verification by financial institutions like credit union, banks, or businesses|
|10||Paying a rental car with a debit card|
|11||Applying for auto loan, student loan, business loan or personal loan|
|12||Requesting credit limit increase with a short credit history|
How credit inquiries affect credit scores
Though a hard inquiry hits your credit score by few points, don’t make the mistake of having too many hard inquiries. It can worsen your financial situation if you have a borderline credit score.
Don’t apply for too much credit at the same time. If it happens, creditors will draw the conclusion that you’ve been denied credit previously and now you are desperate for it. In short, you appear as a higher risk to the borrower.
Can you dispute hard inquiries?
Check your credit report and get full information about your credit inquiry. But, if it’s done with your approval, it’ll take 2 years to fall off from your credit report.
Is it important to remove credit inquiries?
But, there are other negative items that stay on your credit report for 7 to 10 years causing severe damage to your credit score.
So, remove those items from your credit report first that are causing serious damage to your credit score. Don’t worry if you have fewer inquiries, since they’ll automatically drop off from your credit report after 2 years.
But, if your credit report contains too many negative listings, removing credit inquiries may help improve your overall credit score.
If you face difficulty, you may take help from a professional credit repair company. It’ll show you the right path to repair your credit. However, you should know that there’s nothing which a credit repair company can do and you can’t.
- More information: How to deal with creditors to remove inquiry
Some pieces of advice
Keep track of your hard credit inquiries. Build your credit score before applying for credit. Avoid applying for too many credits at one time. Take help from an expert wherever needed.
- Read more: An inquiry into credit report inquiries