Also known as “credit checks” or “credit pulls,” a credit inquiry occurs when your credit report is viewed. These inquiries occur when you check your own credit report and when other parties check your credit for loan applications, new credit cards and mortgages. There are two types of credit inquiries: hard inquiries and soft inquiries.
What is a hard credit inquiry?
A hard credit inquiry is a formal request by another party to review your credit report. These requests usually come from potential lenders who are interested in the strength and history of your credit score before agreeing to offer you a loan.
If you apply for a loan of any kind, you authorize the creditor to request a hard inquiry into your credit report. Creditors do this to check that your credit score meets their requirements and to ensure you have no negative markings on your report, like late payments or charge-offs. Negative markings indicate to creditors that you may not be a responsible loan holder and will likely reduce your chances of being accepted for a loan.
What is a soft credit inquiry?
A soft credit inquiry is a check into your credit report that will not affect your credit score. Because soft inquiries are not caused by specific applications for loans or credit cards, they are visible only to you when you view your credit report. If you apply for a loan or credit card, lenders will not be able to see these soft inquiries.
Soft inquiries typically occur when an individual or company checks your credit report.
The most common types of soft inquiries occur when:
- Accessing your own credit report
- Being pre-approved for a credit card without request
- A potential employer performs a background check
- Applying for certain utilities and services
Other types of credit checks that could appear on your report as either a hard or soft inquiry include those done by utility, cable, internet and cell phone providers. If you are unsure how these inquiries affect your score, ask the provider to verify what type of inquiry they performed into your credit report.
When do hard credit inquiries occur?
Hard credit inquiries occur any time you apply for a loan or credit card. When you apply for a loan, you give the lender permission to check your credit history. When they check your credit report, it may be listed as a hard inquiry.
Certain events may trigger a hard inquiry into your credit report.
Common hard inquiries occur when applying for:
- Credit cards
- Auto loans
- Student loans
- Apartment rentals
Does a hard inquiry affect your credit score?
A hard credit inquiry may lower your credit score, though how much your score decreases varies based on individual credit history. The inquiries on your credit report account for 10 percent of your credit score, though not every inquiry on your report is included in this percentage. Typically, a single hard inquiry will not have a major impact on your credit score.
There is a common misconception that checking your own credit report will hurt your credit score. Checking your own credit scores with a free service or through some credit bureaus will not lower them because they are listed as soft inquiries on your credit report.
In fact, checking your credit score often is good for your credit. The more you monitor your credit reports, the more informed you are of your current financial status. Checking your scores often will also help you catch mistakes more easily.
How many points does a hard inquiry lower your credit score?
A single hard inquiry may decrease your credit score by five points or fewer. However, the impact of the inquiry depends greatly on your unique credit history.
Hard inquiries may have a greater effect on your credit score if:
- You have few or no credit accounts
- You have a short credit history
- You authorize many inquiries in a short period of time
How long do hard inquiries stay on your credit report?
A hard inquiry will stay on your credit report for two years. However, they only impact your credit score for 12 months, with those from the past six months counting the most against your score.
If your credit history is substantial, a few hard inquiries on your credit report will likely not have a significant impact over the two years they are listed on your account. But be cautious of authorizing too many hard inquiries in a short amount of time. The more closely spaced hard inquiries are on your credit report, the more they will hurt your credit score.
How can you remove hard inquiries from your credit report?
If you apply for a loan, a hard inquiry will appear on your credit report. These authorized inquiries cannot be removed from your credit report. However, inaccurate information and unauthorized inquiries can be disputed with the credit bureaus.
Federal law allows you to dispute any information on your credit report that you determine to be inaccurate or suspicious. You should review your credit report often to check for errors. If you do not recognize a hard inquiry on your credit report or find mistakes in the information listed, it is important to act quickly to have the information removed. In some cases, unauthorized, hard inquiries could signal that your identity has been stolen.
How can you dispute a hard credit inquiry?
To dispute a hard inquiry, write a letter to the credit bureau stating that the inquiry is an error that needs to be removed or corrected. In the letter, list all relevant information about the hard inquiry, including the name of the business who made the inquiry and the date they inquired.
Once the credit bureau receives your letter, they are required to conduct an investigation into the business who listed the inquiry on your credit report. If the credit bureau determines that the inquiry was made in error, it will be removed from your credit report.
You can contact the Consumer Financial Protection Bureau for issues concerning your credit report, including the dispute of a hard inquiry.
Can you avoid hard credit inquiries?
It is difficult to avoid hard credit inquiries if you apply for a loan or credit card. However, hard inquiries don’t have a significant impact on your credit score, affecting only 10 percent of the overall score.
If you want to improve your credit score after it has been affected by a hard inquiry, consider focusing on the factors that play a larger role in determining your scores. These factors include your payment history, credit usage, the length of your credit history and your credit mix.
It may be easier to improve your credit score by paying your bills on time, monitoring your credit card balances and clearing any collection accounts that may appear on your credit report rather than try to avoid credit inquiries.
If you are concerned with your credit score or are unsure how to learn more about an inquiry on your report, a credit repair specialist can help.