The Truth About Inquiries: How Much Do They Hurt Your Credit Score

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In this age of technological advances, identity theft and account hacking, it’s more important than ever for people to monitor their credit scores. Banks, businesses, employers, and credit card companies are just some of the other interests that may make inquiries into a person’s credit worthiness. Some credit score inquiries affect your overall credit score, while some have no effect at all. How do you know which checks can hurt your score and which won’t? Let’s find out.

Credit Inquiries Defined

First, consumers need to understand just what a credit inquiry, or credit check, is. When an institution requests a credit report from a credit reporting agency, they are conducting a credit inquiry. Credit inquiries occur when a person applies for a loan or a credit card, as part of a background checks by landlords or potential employers and by individuals monitoring their own credit.

Types of Credit Inquiries

Credit score Inquiries can come in two forms: a hard inquiry, or hard pull, and a soft inquiry, or soft pull. Hard checks happen at the request of lending institutions. Soft checks are inquiries not related to loans and credit applications. Each type of credit check affects your credit rating differently.

Hard Inquiries

When people apply  for a credit card, a mortgage, an auto loan or any other type of loan, the lender makes a hard inquiry of their credit report. The potential lender may check one or several credit reports to determine the potential borrower’s credit worthiness.

Hard credit score pulls can lower a credit score by as much as five points. They also remain on the credit report for two years. However, the hard inquiry only affects your rating for the first year. After the two years is up, the hard pull is dropped. One exception is when lenders check credit to determine the terms and interest rate to offer borrowers. In this case, the hard pull doesn’t affect your credit rating.

Time periods vary based on the age of your credit, but all credit score inquiries made in the same 14- to 24-day period count as one inquiry. It’s a good idea to do all your loan shopping in that two-week time frame to reduce the number of inquiries and keep your credit rating from dropping too much. It’s important to note that when lenders see a large number of hard inquiries over time, they may assume you’ve been denied credit in the past, which could negatively affect your approval for current loans and credit or, at the very least, affect the terms and interest rate offered to you.

Soft Inquiries

These are inquiries not in connection to loan or credit applications. When you check your own credit score for monitoring purposes, it’s considered a soft inquiry. The same is true when employers or landlords check your rating to gauge your character and whether you’re a responsible person.

Soft credit score inquiries have no effect on your credit score. This is especially good news for individuals in terms of monitoring credit scores. Anyone can access their credit scores at anytime without worrying about lowering their scores.

Removing inquiries from your report

If the inquiries are timely and accurate, the Federal Trade Commission prohibits removing them from a credit report. Although, in cases of inaccurate inquiries, reporting errors , identity theft or other fraudulent activity, you can send a credit inquiry removal letter to the credit bureau explaining the issue. Include a copy of your credit report and evidence that the inquiry wasn’t authorized by you. Sample letters are available through the Federal Trade Commission. The credit bureau has 30 days from the receipt of your letter to investigate and respond. A favorable response results in the removal of the questionable inquiries.

Give Yourself Credit

Maintaining a quality credit score is as easy as paying your debts on time and in full. Sometimes, though, life happens, and credit ratings suffer. Identity theft, job loss, bankruptcy and other financial setbacks can cause credit scores to drop. Low credit scores mean more difficulty getting loans and other types of financing. If your credit score has dropped, check your credit report for negative information which could include these:

  • High balances
  • Collections accounts
  • Repossessions
  • Bankruptcies
  • Late payments
  • Defaulted accounts
  • Charge-offs
  • Foreclosures

Finding any of these derogatory marks on a credit report is a red flag. You’ll need to determine if the information is accurate and belongs on the report or if it’s inaccurate and worthy of disputing. People often discover the existence of negative information on credit reports after credit score inquiries lead to loan denial. Fortunately, there are ways to repair bad credit. Professionals like the people at Coast Tradelines can help you get back on your feet. Give yourself credit for making sound credit decisions by contacting Coast Tradelines at 619-363-1472 and learning how they can help you rebuild your credit.