Did you know that having your credit checked counts as a credit inquiry? You might have heard this referred to in different ways, like calling it a soft check or a hard inquiry.
Despite the name differences, both soft checks and hard inquiries refer to a similar action. While they are both a type of credit inquiry, they have different impacts on your credit. Today, we’ll explore what is a credit inquiry and how it can affect your score.
How does a credit inquiry work?
A credit inquiry is when your credit score is checked, whether it’s you who’s checking your score or you’ve given someone else permission to run an inquiry. In some cases, you’ll agree to the credit inquiry, and other times, it may happen without your knowledge.
This typically occurs if you have to run your credit for approval when applying for a credit card or a mortgage. A credit check might even be required if you want to open an account with a new cell phone service.
What counts as a credit inquiry?
Any time you consent to have your credit checked, the check will count as an inquiry, though there are two different types of inquiries. These include a hard inquiry and a soft inquiry.
Is a credit inquiry bad?
You have credit and you are entitled to use it. Though credit inquiries aren’t “bad”, too many can have a significant impact on your credit score. Each time you have an inquiry, it can cause your credit score to drop. This is not ideal if your score is also low or if you have limited to no credit history.
Will checking my credit score lower it?
There are various apps that allow you to check your credit score or even a free annual credit check are considered soft credit check, they do not lower your credit score. If you are completing a hard inquiry, that will temporarily lower your credit score.
How many points do you lose for a hard inquiry?
A hard inquiry can lower your credit score anywhere from 5-10 points.
Do multiple inquiries count as one?
You can have some credit exceptions where multiple inquiries can count as a single inquiry. This is usually if you are rate shopping for a mortgage or an auto loan rate. You have anywhere from 14-45 days to check different rates, this depends on the credit scoring model. This window gives you that chance to find a better rate without taking multiple hits to your score. Keep in mind this typically does not apply to credit card applications.
How long do hard inquiries stay on your credit report?
A hard inquiry can stay on your credit report for two years but in some extreme cases, an inquiry can stay for 7 years.
Why do inquiries matter?
Inquires play a factor in different parts of your credit score.
When you’re looking for a house or car, you’ll want to search for a lender who can meet your needs. Conducting successful rate shopping, which entails looking at multiple lenders in search of the right one for you and your needs, is vital. Rate shopping is a reason to allow multiple credit checks, which can cause you to run the risk of your score taking a severe drop, but it’s worth it.
Number of inquiries can impact decision making
Lenders and even credit bureaus take the number of inquiries you have on your credit into consideration. This means inquiries can impact your approval odds, your credit score, and even the interest rate you’re offered. To some lenders, a lot of inquiries will be unfavorable because it might imply that you have low approval odds.
Stay on top of your score
Checking your score is a soft credit check so it does not impact your score. Stay on top of your credit score. That way, when you are looking to apply for either a credit card or loan, you’ll have a better idea of what your approval odds will be. By knowing this information, you can cut down on the number of inquiries applied to your report.
Soft inquiry vs hard inquiry
A hard inquiry typically occurs as a result of an application. This means a creditor wants to check creditworthiness to determine if they can lend you money for something like a mortgage or a credit card.
A soft inquiry takes place when someone runs your credit with no plan to lend you money, though they still need to check your creditworthiness. This could happen when signing up with a utility company or if your credit card company needs to check your credit score as part of the pre-approval process.
Soft inquiries are a little different because they do not impact your credit score as intensely. At most, they will lower your credit score ever so slightly for a few days.
How to remove hard inquiry from credit report
Hard inquiries can stay on your credit report for about two years, but what if you need those credit pulls to go away sooner? Here’s what you can do to remove hard inquiries from your credit report.
Send a hard inquiry removal letter to the credit bureaus
If you find an error on your report, you can send a hard inquiry removal letter to the credit bureau. Mistakes happen or even if you have had fraud on your credit, you can request a hard inquiry removal. You might need to provide proof to be prepared with documentation for the credit bureau.
Wait until the inquiry goes away naturally
Eventually, a hard credit inquiry will go away on its own. Depending on the nature of the inquiry and the purpose of the credit check, it could take up to seven years for a credit check to be removed on its own. If you have time, you can wait it out and watch your score change once the inquiry is gone.
Check your credit score regularly
Prevention or catching early is a great way to stay on top of hard inquiries. You can detect fraudulent activity quickly and contact the credit bureaus sooner if you make a habit of regularly checking your credit.
Not all inquiries are bad
Credit inquiries are required when you have credit. You need soft and hard inquiries to learn what you qualify for and get your best rate.
It is simply important to be selective and intentional when giving others access to your credit report. Every inquiry counts, and even though you can have a hard credit inquiry removed, you’ll still want to minimize the number of pulls you allow.
Not all inquiries are bad. Just make sure they are necessary before you give someone permission to check your credit score.