A credit inquiry is a fairly simple thing, but it has some potential effects on your credit. The actual inquiry is something that legitimate businesses can do to look at your credit. They come in two types: hard and soft inquiries. We’re going to look at how these inquiries work, what they do to your credit score and how to remove credit inquiries from your report.
By the time we’re finished, you’ll have the information you need to understand how these work and what you can do about them.
Can I Get Inquiries Removed From My Credit Report?
Credit inquiries stay on your report for two years, which brings us to the big question: can you have them removed if they are hurting your score?
- New accounts – Your score is affected by the number of new accounts you have in various categories. Installment loans like mortgages or student loans are better than revolving credit like credit cards
- Amount of inquiries – This looks at how many inquiries you’ve had in the last two years.
- Time between inquiries – Your score is affected for 12 months after an inquiry, but the actual inquiry remains for 2 years.
- Length of time since new accounts – Your score is also changed based on when you last opened a new credit account. The longer the better.
As you can see, credit inquiries are just a small part of the larger puzzle. Many people will try to focus their time and effort on removing them when they also have more pressing issues like late payments or charged-off accounts. In this case, you should shift focus to the items that are more detrimental to your credit score.
When it comes time to remove these inquiries from your report, you can either wait for two years at which point they will come off your report, or you can try to remove them through this credit repair process:
Step One: Gather Your Reports
The first step in any successful credit repair, is to gather the reports you are entitled to from the three credit bureaus: Experian, Equifax, and TransUnion. These reports are all generated from different sources, so there’s going to be discrepancies that could be dragging down your score.
When you’re looking at your credit reports, you’ll see that some of the inquiries are promotional and only shown to potential creditors. You don’t need to concern yourself with these. Instead, you should be looking at inquiries that were not done by yourself.
Step Two: Find Addresses
Your Experian report will show addresses for each creditor that inquired on your report, but the other two bureaus will not include this information. Match your reports and use the same addresses as the ones listed on the Experian report.
If you have trouble finding the addresses for some of the creditors, you can call the bureaus themselves to get the information you need.
Step Three: Contact The Creditors
You should compile letters to the creditors that inquired on your report without your permission. In these letters, be polite, but firm in your intentions. Ask them to remove their unauthorized inquiries from your report.
If they respond by telling you that you authorized the inquiry, ask for the contract that you allegedly signed. If there’s any hidden subtext in the contract or confusing verbiage, you can inform them that you didn’t fully understand the contract when you signed it.
Leverage your right to report them to the State Banking Commission and make sure that the letters you send are Certified Mail Return Receipt Requested, and if they don’t respond within 30-days, you have the right to demand a response.
In many cases, the creditor will be happy to remove the inquiry if you’re polite and justified in your request. You can’t remove all of them, but removing some may increase your credit score by making it look less like you’re trying to gather as much credit as possible.
Remember always that credit inquiries are a small part of your credit score calculations. When discussing options with your credit repair agency of choice, ask them about potential opportunities to remove inquiries from your report that were not authorized.
What are Credit Inquiries & How They Affect Credit Scores
When you apply for credit in any form, you’re also giving the lender permission to “inquire” for a copy of your credit report from one of the three credit bureaus: Experian, Equifax, and TransUnion.
They do this to look at your credit score and your history. This helps them decide how much a “risk” you pose to them in terms of paying back the debt you owe. Once the inquiry is complete, you’ll notice that it appears on your credit report. You may also see inquiries from businesses you didn’t apply for. This is normal.
Depending on the type of inquiry, you may see your score affected. As mentioned earlier, there are two types of inquiries: hard and soft. We’ll cover the differences later in this article, but suffice to say, hard inquiries are the ones that have a direct effect on your score.
When you apply for a loan, mortgage, or credit card, these all count as single inquiries and will affect your score. You can get around this by doing “rate shopping” which is simple to perform. Within a 45-day period, your FICO score considered all inquiries related to an auto loan, student loan as a single inquiry. For mortgage or rental applications, this is treated as different types of real estate-related inquiries.
In short, if you do your hunting within that time period, you won’t see your score affected by the multiple inquiries. The FICO score, which is the most prevalent option, only takes voluntary inquiries into account that result from an application you submitted.
Here are the ways these inquiries can affect your FICO score:
- Number of recently opened accounts, and proportion of accounts by type
- Number of recent inquiries
- Time since recent account openings
- Time since credit inquiries
- Involuntary inquiries made by businesses where you didn’t apply do not affect your FICO score.
For many people, a single inquiry won’t have a major affect on their score. The change will be less than five points. That being said, people with six inquiries or more on their credit reports have been known to be eight times more likely to declare bankruptcy when compared to people with no inquiries on their reports.
These are generalized statistics, and it should be noted that the actual effect an inquiry has on a credit score will vary from person-to-person based on the rest of their history. Similarly, a single inquiry can have a larger impact if you have less accounts than someone else. And, of course, numerous inquiries will scare off potential lenders since they see it as a bad sign.
When compared to your payment due dates and your overall debt, inquiries have very little sway on your score in the grand scheme of things. That being said, not all credit inquiries are treated the same by FICO scoring methods.
When performing the aforementioned rate-shopping, FICO ignores inquiries made within 30-days prior to scoring. Therefore, if you find a loan within 30-days of your rate shopping, your score won’t be affected by the previous inquiries.
Similarly, a set number of similar inquiries within a 45-day period will be treated as one single inquiry as opposed to multiple ones. Knowing this, rate-shopping seems like a great way to get around the effect of multiple inquiries.
Hard Inquiries vs Soft Inquiries
The biggest difference between hard and soft inquiries, is that only one of them can negatively affect your credit score. Hard inquiries happen when you apply for a loan or credit card. This is when the company pulls your credit report to decide if you are a good fit for them and a low risk opportunity.
These are authorized by you when you apply, which makes them hard inquiries. They can lower your credit score by a few points, and they stay on your report for two years. The effect of the inquiry usually goes away well before it leaves your report.
Similarly, soft inquiries happen when someone checks your credit report as part of a background check. These happen when you’re applying for a job or when a credit card company wants to pre-approve you for a card.
Depending on the credit bureau, soft inquiries may not actually appear on your report. A huge misconception here, is that checking your own report counts as a hard inquiry, but this is not true. Checking your report does not affect your score in any way.
Let’s look at some examples of hard and soft inquiries:
Hard Inquiry Examples:
- Applying for an auto loan, student loan, business loan, or personal loan
- Applying for a credit card
- Applying for a mortgage
- In some cases, applying to rent an apartment, to verify your identity, rent a car, getting a cable or internet account, requesting a credit limit increase, or getting a cell phone contract
Soft Inquiry Examples:
- Checking your own credit report
- Pre-approved credit card and loan offers
- Background checks for employment
- In some cases, the same items as above like renting, getting a cell phone or cable account, and verifying your identity
If you’re unsure of the inquiry type, you can simply ask the company if they will be performing a credit inquiry. They should also be able to tell you if it’s going to be a hard or soft inquiry. You may be wondering why hard inquiries hurt your score, while others do not.
Hard inquiries are needed for certain financial actions, but if you have a large number of them on your report, it shows that you could be desperate for credit, or too much of a risk to be approved by any of the applications you’ve filled out. Simply remember that a lot of hard inquiries in a short period of time can be negative for your score.
To further explain soft inquiries, you must remember that these are done without your permission, so you’re not responsible for them. These are done to provide pre-approval quotes that you’ll typically receive in the mail. The estimated interest rate or approved amount is calculated based on the data received during the soft inquiry.
Sometimes, soft inquiries are also done to check on your credit situation and can be done by current creditors you have an account with.
Do Credit Bureaus Group Multiple Inquiries?
When you’re doing something like shopping for a car or a house, you’re going to weigh your options like any informed consumer would. In the back of your mind, you’re probably wondering if all this shopping around is going to net you with a bunch of inquiries on your report.
Credit bureaus like Experian do not group inquiries together. They are always displayed separately on your report, but don’t fret. Remember that hard inquiries are the ones that affect your score, and this is only when you’re trying to open multiple new accounts or take out a lot of credit at once.
Let’s say you’re at a dealership and applying for a loan to get a car. When this happens, the dealer will most like submit your information to several different lenders so they can find a great combination of low interest rates and fair payment terms.
Credit scoring systems like FICO have been programmed to recognize activity like this as “rate-shopping.” When you do this, they understand that you’re not trying to buy several houses or cars, you’re simply comparing options.
Because of this, they only count the multiple inquiries as one single inquiry. For this to happen, it’s important to remember that the shopping should be done in a short period of time to be recognized properly.
So, when you’re in the market for a house or car, don’t be afraid of inquiries when you’re looking for the best possible deal!