Have you ever applied for a loan or credit card and been told that you were denied because of your “credit score?” You’re not alone. A credit score is a three-digit number that lenders use to determine how risky it is to lend money to you.
The higher your credit score, the less risky it is for a lender to give you money. One factor that can impact your credit score is how many hard inquiries are on your credit report. Let’s take a look at what constitutes a hard inquiry, how long they stay on your report, and what you can do about them.
What is a Hard Inquiry?
A hard inquiry is a check of an individual’s credit report by a potential lender or creditor to evaluate whether that person is likely to be able to pay back their loan. Hard inquiries are typically initiated when someone applies for various forms of financing such as:
- student loans
- personal loans
- home or auto loan
- credit card
The information retrieved from the credit report helps lenders make decisions about whether or not to approve the applicant for the requested funds. Knowing what type of credit inquiries you’re dealing with can help you make more informed decisions.
Hard Inquiry vs. Soft Inquiry
Hard inquiries, also known as hard pulls, can adversely affect a person’s credit score. Soft inquiries, on the other hand, do not affect a person’s credit score.
Soft inquiries occur when someone is checking their own credit report or if an employer is conducting a background check. Unlike hard inquiries, soft inquiries are not seen by potential creditors and therefore do not have an impact on one’s creditworthiness.
The Impact of a Hard Inquiry on Your Credit
Credit scores can be impacted negatively by hard inquiries; however, multiple hard inquiries within a short period (often 30 days) will only count as one inquiry on most credit scoring models. It’s important to recognize that different types of inquiries can have varying levels of impact.
Generally speaking, a single hard inquiry will only take five points off your FICO Score; however, multiple inquiries within the same 30-day window can lead to a more significant drop in score.
If you are shopping for loans or other forms of financing within a limited period (such as car loan shopping), all those inquiries will count as one, meaning the overall impact from all those inquiries is likely to be much less than if you had submitted individual loan applications over a longer time.
How Long Does a Hard Inquiry Stay on a Credit Report?
Hard inquiries stay on your credit report for two years. During this time, as mentioned earlier the inquiry will harm your credit score by about five points per inquiry on average.
After two years, the hard inquiry will fall off of your credit report and no longer affect your credit score. It is important to keep track of when any hard inquiries are made so you can plan accordingly and minimize the damage they cause to your credit score.
Inaccurate Hard Inquiries
Inaccurate hard inquiries can occur on your report as a result of a variety of reasons. In some cases, the credit bureau may inaccurately list hard inquiries that were not initiated by you.
This usually occurs when an individual with similar personal details applies for a loan or other type of credit and their inquiry is mistakenly listed on your report instead.
In other cases, the lender may fail to inform the credit bureau of your inquiry, leading to an inaccurate listing.
Additionally, errors in computer coding can also lead to inaccurate hard inquiries being listed on your report.
No matter the cause of an inaccurate hard inquiry appearing on your report, it is important to dispute them as soon as possible so that they can be removed. This will help to ensure that your credit score is not adversely affected by the incorrect listing.
How to Remove Inaccurate Hard Inquiries on Your Credit Report
When it comes to removing inaccurate hard inquiries from your credit report, there are a few steps that you should follow.
Check Your Credit Reports
Obtain credit reports from all three credit bureaus: Equifax, Experian, and TransUnion. The same information is frequently recorded on all three, but not always, which is why it is critical to check all three.
AnnualCreditReport.com allows you to obtain your credit reports for free once a year.
Identify Inaccurate Hard Inquiries
When you receive your credit report, there will be a section for hard inquiries. Go over the entire report and ensure that it’s correct.
Pay special attention to the inquiry section. Make sure you recognize every hard inquiry that is listed here.
Keep in mind that sometimes the company listed as having inquired doesn’t exactly match the one you dealt with. This is a common occurrence when retailers have their credit card programs managed by their banks.
Submit a Dispute
To start disputing a hard inquiry, contact the company which reported it to one of the three major credit bureaus. You can contact them by mail or online through their website.
When submitting your request for dispute resolution, provide any documentation that supports your claim and explain why you feel the hard inquiry should be removed.
Once you have submitted the dispute, the credit bureau will investigate the request and contact both you and the company that initiated it to determine if further action is necessary.
It’s important to note that disputing a hard inquiry does not always guarantee success; however, if the inquiry was made without your knowledge or consent, then there is a better chance of having it removed from your report.
Conclusion
Hard inquiries are just a standard part of the credit application process. If you have a solid, long credit history, one hard inquiry will hardly affect your credit score.
That said, you have to keep in mind that if you’re applying for multiple lines of credit in a short period, hard inquiries will start to have a negative effect.
And even though hard inquiries remain on your credit report for two years, you can still work to improve your credit score. Paying your bills on time, responsibly managing your debt, and avoiding taking out too many loans or applying for too much new credit are all effective ways to improve your credit standing.
