It can be difficult to understand some things in life if we don’t know how they work. Your credit score, for example, may have errors on your report that’s damaging your score and you didn’t even know. You may even face consequences when using your credit cards without your knowledge too. It’s important that you know the basic facts such as what happens when retailers and financial institutions access your credit report or the fact that credit inquiries could harm your score while other inquiries won't. You have to make sure that these things do not severely damage your creditworthiness, especially when dealing with potential lenders. You need to educate yourself and be on top of your credit scores.
In this article, we will talk everything about credit inquiries including their types and the ones that could affect your credit.
Hard Inquiry
Also known as “hard pulls”, hard inquiries are what occurs when a financial institution like a lender or credit card issuer, checks your credit report before making a lending decision. The usually take place on mortgage, loan, or credit card applications and you commonly have to authorize them. A hard inquiry may lower your score by a few points and will usually stay on your report for two years. Although single hard inquiry doesn’t play a much bigger role in the approval or denial of your loan and the damage to your credits usually lowers or disappears even before the inquiry drops of your credit reports permanently, you may still need to carefully decide before you apply for multiple credits at the same time or even within the span of a few months. When multiple hard inquiries occur within a short period of time, lead lenders and credit card issuers may look at you as a higher-risk customer because in their eyes you’re short on cash or about to be buried in debt. It is, therefore, best if you spread out your credit card applications.
Soft Inquiry
Soft inquiries happen when a person or company checks your credit report as a background check such as when you check your credit score or a mortgage lender made a preapproval of your loan. This type of inquiry, also known as “soft pulls”, may occur without your permission although they won’t affect your credit in any way. If you’re currently looking for a job, the company may also run a soft inquiry before giving you the job. You can only view the soft inquiries in your credit reports since they aren’t connected to a specific new credit application.
How to deal with hard inquiries?
Since hard inquiries can affect your credit score, it’s important that you know how to deal with them. Although you can never avoid a hard inquiry, you can, however, shop around for the best deal on a mortgage or auto loan. Some of them have credit scoring models that combine multiple inquiries within a certain time period in just one. You also need to stay consistent and work fast if you considering to rate shop. Credit bureaus typically notice you're doing a comparison shopping base on the types of credit lines you’re applying for and how big your requested loan is. They will then usually give you a 14 to 45-day window to finish shopping.
It’s advisable that you check your credit score and only consider applying for credit cards and loan with the highest possibilities of you being qualified. You are actually minimizing the number of inquiries you get by doing this since you can’t avoid them anyway. However as mentioned above, hard inquiries can possibly damage your credit health but they usually play a minor role in your score so don’t stress yourself out about them.
How to get rid of unauthorized hard inquiries?
There are some cases of hard inquiries conducted to individuals without their authorization. If this happens to you, simply contact the creditor through a phone call or a letter telling them you did not authorize the inquiry and that you request for it to be removed. Any incorrect information on your credit report can be deleted by disputing them directly with the credit bureaus. It’s only right for you to make sure that your credit score is accurate by ensuring the information used to calculate it is correct.
Conclusion
It’s normal to worry about the possibility of being rejected and your score dropping when doing a new credit account application. But if you’re aware of the types of inquiries that may affect your score, learn how excessive inquiries and submitting applications for credit you’ll likely be approved for, you should have no problem getting the credit that you want.
