A credit inquiry occurs when you apply for a loan or credit card and authorize the creditor to access your credit report. Once an inquiry is pulled, it is listed at the bottom of your credit report. This allows future creditors to see how much credit you have requested in the past two years.
Your credit score also drops with each inquiry. It’s just a small amount that won’t have much impact on your score if you only have a few inquiries. However, the point loss can add up if you have a significant amount of credit pulls.
While time can heal all wounds, there are some practical steps you can take to have these items taken off your credit report much more quickly. Read on to find out exactly how credit inquiries work and what you can do to get rid of them.
Types of Credit Inquiries
When it comes to understanding your credit report and how it affects your credit score, it’s important to know the different types of credit inquiries that can appear on it. Credit inquiries are requests made by lenders or organizations to view your credit report.
These requests can come in two forms: hard inquiries and soft inquiries. In this section, we will discuss the differences between the two and how they impact your credit score.
A hard credit inquiry, or hard pull, is a request for your credit report made by a lender, credit card issuer, or other creditor when you apply for credit, such as a loan or credit card. The information they receive helps them decide whether they wish to extend you credit, and what kind of interest rate they can offer you.
In addition to loan and credit card applications, a hard inquiry might also occur when you request an increase in your credit card limit or get a cell phone contract. Furthermore, some employers and insurance companies will run a hard credit check when applying for a job or insurance.
These inquiries stay on your credit report for two years. They can have a negative impact on your credit score, especially if there are multiple hard inquiries in a short period of time.
A soft credit inquiry, or soft pull, is a request for your credit report made by organizations or individuals who are not necessarily trying to extend credit to you. These can include potential employers, landlords, or insurance companies.
You might also have a soft inquiry performed when you apply to rent an apartment, rent a car, or open a bank account.
Soft inquiries do not affect your credit score and will not be visible to anyone except yourself when you view your credit report. If you’re uncertain whether a hard or soft pull will be conducted, it’s ok to ask for verification before you submit your request.
Why do hard inquiries hurt your credit score?
When lenders see numerous hard inquiries on your credit history, they may become suspicious that you are on the brink of financial trouble.
It might seem like you’re in a rush to get credit because you lack the funds for your expenses. This could imply that you may have difficulty repaying new debt.
Additionally, if the hard inquiries are newer, a lender might worry that you received one or more of those lines of credit and the accounts simply haven’t shown up on your credit report yet.
They might then worry that they don’t have an accurate gauge on your credit situation, like your debt-to-income ratio. These uncertainties are reflected as lost points on your credit score.
How long will my credit scores suffer?
Luckily, your credit scores won’t suffer for too long. After six months, they will start to recover and should rebound completely after 12 months from the initial inquiry. That just leaves one remaining year on your credit history for lenders to see your activity.
If you are shopping for a specific loan and check interest rates with several lenders within a short period of time, the hard pull will only be counted once.
For example, if you are trying to refinance your loans and apply to five different lenders to compare rates within a two-week period, those five inquiries only affect your credit score as one hard inquiry.
How many hard inquiries should I aim to have on my credit report?
Too many hard inquiries on your credit reports can start to hurt your credit scores. So, it’s best to try to stick to just one or two hard inquiries each year. You can make this easier on yourself by attempting to anticipate what types of new credit you might need over the next year.
Maybe you’re sick of renting and want to apply for a mortgage. Or perhaps your car is old and you know you’ll need a new one soon. Of course, life always has surprises we can’t account for, but try to plan what types of loans or other credit you’ll be shopping for in the next year.
Remember that it’s best to group similar inquiries together because that way they’ll just count as one on your credit score. This is where planning comes in.
Don’t perform a hard inquiry for a mortgage pre-approval “just to check” whether you’d be approved for a home loan. Otherwise, those inquiries will be spread out and hurt your score multiple times. Focus on increasing your credit scores, then apply when you are serious about shopping for a mortgage.
Although hard inquiries are automatically removed from your credit reports after two years, there are a few steps you can take before then.
1. Get Copies of Your Credit Reports
Start off by requesting your free credit report from each of the three major credit bureaus at AnnualCreditReport.com.
This service is free once every 12 months. You’ll receive a credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion.
You should view each one individually because the information reported to each may vary slightly. Lenders typically look at all three credit reports, and you should too.
2. Review Your Credit Reports
At the bottom of your credit report, you’ll find the inquiries section where each hard pull from the last two years is listed.
Review each one carefully to make sure it is something you authorized, such as a credit card or car loan application. Those will need to remain on your credit report for the rest of the two-year period. However, you might see inaccurate hard inquiries. This, by the way, could be a sign of identity theft.
3. Contact the Credit Bureaus
If you find inaccurate or unauthorized hard inquiries, you can write a dispute letter to each credit bureau individually. Ask them to remove the hard inquiry from your credit history.
Your Experian credit report lists the creditors’ addresses. Otherwise, you’ll need to call or look up the proper contact information for the ones on your Equifax and TransUnion credit reports.
When writing to a credit bureau, there are a few key things to always remember. First, always be polite in your dispute letter.
Let them know that you don’t remember authorizing the hard inquiry and that they are not allowed to file an inquiry without your permission. Ask them to send you proof of your authorization if they do, in fact, have it.
Otherwise, request that they promptly delete the inquiry from your credit report and verify the removal by sending you a copy of the appropriate documentation.
Don’t forget to thank them, and sign with your name and social security number so they can easily access your file. Then send your letter via Certified Mail Return Receipt Requested.
The Fair Credit Reporting Act requires credit bureaus to review disputes within 30 days and then provide you with the results within an additional five days.
4. Follow Up with the Credit Bureaus
Keep an eye on the calendar and give the creditor 30 to 35 days to respond. If the credit bureaus do not remove a hard inquiry from your credit report after you have disputed it, you have a few options.
First, you can try contacting the creditor or lender who made the hard inquiry and ask them to remove it from your credit report. If that doesn’t work, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
The CFPB is a government agency that helps consumers resolve issues with financial companies, including credit bureaus. You can file a complaint online or by calling the CFPB’s toll-free phone number.
Additionally, you can contact your state attorney general’s office and file a complaint. They will investigate the dispute and may be able to help you get it resolved.
Whenever you dispute something on your credit file, it’s vital to retain strict documentation of all your communications with the creditor and credit reporting agencies, including letters and phone calls. But oftentimes, a creditor will quickly delete the inquiry with ease, rather than dragging out the process.
Getting Help from Professionals
If you just have a few hard credit inquiries, it may not be worth the time and effort to try to remove them at all because they’ll only minimally affect your credit score.
But when you have multiple inquiries in addition to other types of negative items, it’s time to bite the bullet and work on disputing as many of those items as possible.
For the most effective results, you may consider hiring a credit repair company to do the work for you. They’ll know how to take advantage of your legal rights while ensuring proper procedure has been followed for each of your disputes. Here’s a list of our top credit repair company reviews to help you get started.
Removing inaccurate hard inquiries from your credit report can be a great way to boost your score by a few points or even more. This is especially helpful if you’re riding the line between two credit score rankings.
By crossing the threshold from “fair” to “good,” for example, you’ll automatically qualify for better interest rates on loans, mortgages, and credit cards.
Even if you don’t intend to take out any new credit in the new future, you can always use your improved credit score as leverage for negotiating better rates on existing credit accounts. So check your credit report today to find out if you should work on removing those hard inquiries.