1. What is a credit inquiry?

A credit inquiry is a request made by a lender or other authorized party to check an individual’s credit report and obtain information about their credit history and current financial standing. This inquiry may be a “hard” inquiry, which can affect the individual’s credit score, or a “soft” inquiry, which does not impact their score. Lenders typically make credit inquiries when considering an individual for loans, credit cards, or other types of financing.
2. How are credit inquiries used?
Credit inquiries are used by lenders and creditors to assess an individual’s level of risk as a borrower. The information obtained from these inquiries, along with other factors such as income and employment history, helps them determine whether to approve the person for credit and at what terms (interest rate, loan amount, etc.). Inquiries can also be conducted by insurance companies, landlords, employers, and others to evaluate an individual’s trustworthiness and responsibility with financial obligations.
3. Are all credit inquiries the same?
No, there are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries occur when a lender requests your credit report in order to make a lending decision. These are typically associated with loan applications and can lower your credit score if there are too many in a short period of time. Soft inquiries occur when you request your own credit report or when businesses conduct background checks on you that do not involve lending decisions (such as pre-approved offers). These do not impact your credit score. Additionally, hard inquiries remain on your credit report for up to two years while soft inquiries are only visible to you.
4. How can I limit the number of hard credit inquiries on my report?
You can limit the number of hard credit inquiries on your report by being selective about applying for new lines of credit or loans. Each time you apply for new credit, it will result in a hard inquiry on your report. Instead, try researching different credit options and only apply for those that you are confident you will be approved for. You can also monitor your credit report regularly to ensure that all hard inquiries listed are authorized and accurate.

2. How do hard inquiries affect my credit score?

When you apply for credit, the lender will often request a copy of your credit report from one or more credit bureaus. This is known as a hard inquiry and it can affect your credit score in the following ways:

1. Impact on Credit Score: Hard inquiries can have a negative impact on your credit score. Each hard inquiry can typically lower your score by a few points, although the exact impact may vary depending on your individual credit history.

2. Temporary Effect: The effect of a hard inquiry is usually temporary, and it should disappear within a year. After 12 months, the inquiry will no longer factor into your FICO® Score.

3. Multiple Inquiries: If you have several hard inquiries in a short period of time (such as multiple credit card or loan applications), this can signal to lenders that you are actively seeking credit and may be considered a higher risk borrower.

4. Shopping Around: If you are shopping around for the best rate for a loan or mortgage, it is important to do so within a short period of time (typically within 14-45 days depending on the specific scoring model) to minimize the impact of multiple hard inquiries.

5. Pre-Approval Inquiries: While checking your own credit report does not affect your score, pre-approved offers or account review inquiries initiated by lenders do count as hard inquiries and can affect your score.

It is generally recommended to limit the number of hard inquiries on your credit report as they could potentially lower your score and make it harder for you to qualify for new lines of credit. However, if you are shopping around for loans or mortgages, it is important to be selective and focus on submitting applications with lenders who are likely to approve you based on their requirements to minimize the number of hard inquiries on your report.

3. Can I remove hard inquiries from my credit report?

Unfortunately, it is not possible to remove legitimate hard inquiries from your credit report. Hard inquiries are a necessary part of the loan and credit application process and cannot be removed unless they were done without your permission or as the result of identity theft. However, multiple inquiries for the same type of credit within a short period of time (typically 30-45 days) will only count as one inquiry on your credit score, so it’s best to complete rate shopping within that timeframe to minimize any potential negative impact on your credit.

4. What are the different types of credit inquiries?

There are two main types of credit inquiries: soft inquiries and hard inquiries.

1. Soft Inquiries:
Soft inquiries are made when you check your own credit score or when a lender or company checks your credit for promotional purposes, such as pre-approved offers for credit cards or loans. Soft inquiries do not affect your credit score and can only be seen by you.

2. Hard Inquiries:
Hard inquiries occur when you apply for credit, such as a new loan, credit card, or mortgage. They require the authorization of the borrower and involve a review of your full credit report. Hard inquiries can remain on your credit report for up to two years and can slightly lower your credit score.

3. Account Reviews:
Account reviews are another type of soft inquiry that occurs when an existing creditor periodically checks your credit report to see if you are still eligible for the terms of their agreement with you.

4. Employment Inquiries:
Some employers may conduct a soft inquiry on job applicants to evaluate their financial responsibility before offering them a job.

5. Collection Agency Inquiries:
If a collection agency is trying to pursue repayment from you, they may conduct a hard inquiry on your account to assess your ability to pay back the debt.

5. How long do hard inquiries stay on my credit report?

Hard inquiries stay on your credit report for up to two years. However, their impact on your credit score decreases over time and may only have a significant impact for the first year. After two years, hard inquiries will no longer be listed on your credit report.

6. Can too many hard inquiries hurt my credit score?

Yes, too many hard inquiries can hurt your credit score. When you apply for credit, the lender will request a copy of your credit report from one or more credit bureaus. Each time this happens, it generates a hard inquiry on your credit report. Having too many hard inquiries in a short period of time can signal to lenders that you may be taking on too much debt and could be a higher credit risk. This can lower your credit score by a few points. However, the impact is usually temporary and will likely have less of an effect as time passes and as you continue to make timely payments on your accounts.

7. How can I minimize the effect of a hard inquiry on my credit report?

1. Only apply for credit when necessary: Avoid applying for multiple loans or credit cards within a short period of time. This can signal to lenders that you are in financial distress or are trying to take out more credit than you can handle.

2. Do your research: Make sure you do your research and apply for credit with lenders who are more likely to approve your application based on your current credit score and income levels.

3. Apply for credit strategically: If possible, try to limit your applications for new credit to a six-month period. This will minimize the impact on your credit score as it will be considered as a single inquiry.

4. Consider pre-approved offers: Pre-approved offers are essentially “soft inquiries” and do not impact your credit score. Take advantage of these offers instead of applying for new credit blindly.

5. Check your own credit report: Checking your own credit report does not result in an inquiry, so make sure to regularly review and monitor your own report.

6. Be cautious with co-signed loans: If someone else applies for a loan or line of credit with you as a co-signer, it will appear as an inquiry on both yours and the other person’s report.

7. Be patient: Hard inquiries typically stay on your credit report for two years, but their impact lessens over time. So even if you have one or two inquiries, continue making timely payments and managing your existing debt responsibly to help boost your score over time.

8. Do all types of inquiries affect my credit score the same way?

No, different types of inquiries may have different levels of impact on your credit score.

Hard inquiries, which occur when a potential lender or creditor pulls your credit report as part of a credit application, can lower your credit score by a few points. These inquiries typically stay on your credit report for up to two years.

Soft inquiries, which occur when you check your own credit report or when a lender performs a background check for pre-approved offers, do not affect your credit score at all.

Additionally, multiple hard inquiries within a short period of time (usually 14-45 days depending on the scoring model) are typically counted as one inquiry and have less impact on your credit score. This is because it is understood that the borrower is likely shopping for the best loan or interest rate and is not actually taking out multiple loans.

9. Are hard inquiries always bad for my credit score?

Hard inquiries can have a negative impact on your credit score, but the effect is usually small and temporary. A hard inquiry occurs when a lender or creditor pulls your credit report in response to an application for credit. This indicates that you are seeking new credit, and too many hard inquiries within a short period of time can suggest to lenders that you may be taking on more debt than you can handle, potentially making you a higher credit risk.

However, not all hard inquiries are treated equally. For example, multiple inquiries from the same type of lender (such as mortgage or auto loans) within a short period of time are typically counted as one inquiry. Additionally, any hard inquiries made within the rate shopping window (typically around 30 days) for a specific type of loan will also only count as one inquiry.

Furthermore, the effect of hard inquiries on your score diminishes over time and eventually falls off your credit report after two years. As long as you manage your credit responsibly and avoid excessive hard inquiries, their impact on your score should be minimal.

10. What is a soft inquiry?

A soft inquiry, also known as a soft credit check, is a type of inquiry made to an individual’s credit report that does not affect their credit score. These inquiries are typically made by the individual themselves or by companies for pre-approved offers or background checks. Soft inquiries do not impact an individual’s creditworthiness and will only show up on their personal credit report visible to them.

11. How often can I get hard inquiries on my credit report?

Hard inquiries can occur whenever you apply for new credit, such as a loan or credit card. They typically stay on your credit report for two years and can affect your credit score. It’s important to only apply for credit when necessary and to keep track of any hard inquiries so that you can dispute any unauthorized ones.

12. How can I avoid too many hard inquiries on my credit report?

Some steps you can take to avoid too many hard inquiries on your credit report include:

1. Be selective when applying for credit: Only apply for credit when you really need it and limit the number of applications you submit.

2. Research lenders before applying: Do some research and compare different lenders to find out which ones are most likely to approve your application before submitting an application.

3. Understand the difference between a soft and hard inquiry: Soft inquiries do not affect your credit score, so make sure you know whether the lender is conducting a hard or soft inquiry before submitting an application.

4. Consider prequalification offers: Some lenders may offer prequalification checks that allow you to see if you’re likely to be approved without affecting your credit score.

5. Space out your applications: If you need to apply for multiple types of credit, try spacing out your applications over time rather than applying for everything at once.

6. Use alternatives to credit cards during comparison shopping: Instead of using a new credit card for purchases during comparison shopping, consider using cash or a debit card instead.

7. Get a copy of your credit report regularly: Check your credit report regularly so that you can monitor any inquiries and dispute any unauthorized or incorrect ones as soon as you notice them.

8. Consider freezing your credit: You can also consider placing a freeze on your credit, which restricts access to your credit report and helps prevent unauthorized inquiries.

9. Be cautious of co-signing: When co-signing on someone else’s account, remember that their actions will also affect your credit report, including any hard inquiries they may have.

10. Keep old accounts active: Closing old accounts may lower the average age of accounts on your report and could result in more hard inquiries as you open new accounts.

11. Don’t fall for scams promising quick fixes to your credit score: Be wary of any company or service that promises to remove legitimate inquiries from your credit report.

12. Communicate with lenders and credit bureaus: If you believe that a hard inquiry was made without your consent, you can contact the lender or credit bureau to dispute the inquiry. This can result in it being removed from your report if it was unauthorized or incorrect.

13. Do pre-approved offers result in a hard inquiry?

Yes, pre-approved offers can result in a hard inquiry on your credit report. When a lender or credit card company wants to offer you pre-approved credit, they will usually perform a soft inquiry of your credit history. This does not affect your credit score. However, if you decide to accept the offer and fill out an application, the lender may then perform a hard inquiry to review your full credit history and make a final decision on approving you for the credit. This can temporarily lower your credit score by a few points.

14. How do I know if I have too many hard inquiries on my credit report?

A hard inquiry is a record of someone accessing your credit report with your permission, such as when you apply for a loan or credit card. Too many hard inquiries on your credit report can negatively affect your credit score.

To know if you have too many hard inquiries on your credit report, you can check your credit report from all three major credit bureaus (Equifax, Experian, and TransUnion). Each inquiry will be listed on the report along with the date it was made and the name of the company that made it.

Usually, a large number of hard inquiries over a short period of time can indicate to lenders that you are actively seeking new credit, which may make them view you as a higher risk borrower. As a result, they may either deny your application or offer you less favorable terms.

According to FICO, having multiple hard inquiries within a 12-month period can reduce your credit score by approximately 5 points per inquiry. However, this impact will lessen over time as long as you maintain good financial habits.

Generally, it’s recommended to limit hard inquiries for non-essential purchases (such as applying for multiple credit cards at once) and only apply for new credit when necessary to minimize potential damage to your credit score.

15. Can closing old accounts affect my credit score due to a hard inquiry?

Closing old accounts can potentially affect your credit score, but it would typically be due to other factors such as changes in your credit utilization or length of credit history. A hard inquiry (a credit check by a lender or creditor) is not typically associated with closing an account. However, if you apply for new credit shortly after closing an old account and the application results in a hard inquiry, that could potentially impact your score. It’s important to review all potential impacts on your credit before making any decisions about closing old accounts.

16. How do multiple hard inquiries affect my credit score?

Multiple hard inquiries on your credit report can potentially lower your credit score. This is because it signals to lenders that you are actively seeking credit and may present a higher risk for default. The impact of multiple hard inquiries will vary depending on your overall credit history and current credit standing. Generally, having a few inquiries within a short period of time (typically 14-45 days) will be counted as one inquiry, but if there are too many recent inquiries, this can have a more significant negative impact on your credit score. It is important to keep in mind that not all types of inquiries will affect your credit score equally. For example, inquiries made for the purpose of obtaining new auto or mortgage loans may have less negative impact as they are often grouped together as one inquiry when calculating your credit score. However, it is always best to limit the number of hard inquiries on your credit report and only apply for new credit when necessary.

17. Can I dispute a hard inquiry on my credit report?

Yes, you can dispute a hard inquiry on your credit report if you believe it was made without your authorization or you have reason to believe it is inaccurate. You can do so by contacting the credit bureau(s) that are reporting the inquiry and providing them with any supporting documentation or information. The credit bureau(s) will then investigate the inquiry and make a determination on whether it should be removed from your credit report. Keep in mind that legitimate inquiries, such as those made when applying for credit, will usually remain on your report for 2 years.

18. Can closing an account result in a hard inquiry against my credit report?

Yes, closing an account can potentially result in a hard inquiry on your credit report.

When you close an account, the lender or creditor may review your credit history to determine your overall creditworthiness. This review is typically done through a “hard inquiry,” which means that the lender or creditor will request a copy of your credit report from one of the major credit bureaus (Equifax, Experian, or TransUnion).

A hard inquiry can negatively impact your credit score by a few points and will stay on your credit report for up to two years. However, it’s important to note that the impact is usually minimal and should not deter you from closing an account if it is in your best interest to do so.

If you are concerned about potential hard inquiries when closing an account, you can reach out to the lender or creditor and ask if they can close the account without doing a hard inquiry. In some cases, they may be able to accommodate this request.

Overall, while closing an account may result in a hard inquiry, it is not necessarily a reason to avoid closing the account if it will benefit you financially in the long run.

19. Are there any lenders that don’t use a hard inquiry when evaluating an application?

Yes, there are some lenders who offer pre-qualification options that do not require a hard inquiry. Pre-qualification allows you to see if you would qualify for a loan and what your potential rate and terms could be, without it affecting your credit score. However, keep in mind that a hard inquiry will likely be required when you officially apply for the loan. It is always best to check with the lender beforehand to understand their specific application process and if they use hard inquiries for their pre-qualification process.

20. Should I request a copy of my credit report after a hard inquiry has been made?

Yes, it is recommended to periodically request a copy of your credit report after a hard inquiry has been made. This will allow you to monitor your credit and ensure that all inquiries on your report are legitimate. You can request a free credit report once every 12 months from each of the three major credit reporting bureaus (Equifax, Experian, and TransUnion).