When you apply for a credit card, home loan, car loan or personal loan, the lending bank will check your credit reports and score. When the bank requests your score from the credit bureaus to see if you qualify, it generates an inquiry on your credit reports. According to My FICO, that inquiry remains on your credit reports for two years.
Hard Inquiries vs. Soft Inquiries
There are two types of inquiries that you may notice when you check your credit reports. The first type is known as a “hard inquiry”. Hard inquiries are records of the various credit applications you have filled out and submitted. The other type of inquiry is a “soft inquiry”. Soft inquiries are records of various lending companies that have requested your score from the credit bureaus on their own, in order to pre-qualify you for loans. Soft inquiries do not lower your credit score.
How do Hard Inquiries Affect Your Credit Reports and Scores?
Hard inquiries almost always lower your credit scores. How much they lower it depends on factors like:
- How many credit accounts you have, and what types of accounts they are (home loans, credit cards, car loans, etc.)
- How many hard inquiries you have had in the last twelve months
- How long it has been since your last credit account was opened.
Fair Isaac Corporation (FICO) scores only use the last twelve months’ worth of inquiries when they compute your score. Car loans and home loans also get special considerations. From the FICO website:
One exception occurs when you are “rate shopping”. That’s a smart thing to do, and your FICO score considers all inquiries within a 2 week period for an auto or mortgage as a single inquiry.
So if you are shopping for a home or a car, try to contain the inquiries within a two week period to avoid lowering your credit score.
Removing Inquiries from Your Credit Reports
If you feel that there is an inquiry on your credit report that you did not authorize, you do have the right to challenge it and have it removed. In fact, unauthorized hard inquiries are one of the first things that can alert you to a case of identity theft.
Keeping track of the inquiries on your credit reports is one of the main reasons you may wish to monitor your credit reports and scores. We are currently recommending TrueCredit (TransUnion’s credit monitoring service) since they offer additional identity protection features as part of their monitoring service.
When you check your own credit score it is considered a soft inquiry and will not lower your score.
Opting Out to Prevent Soft Inquiries
If you are uncomfortable with lending companies viewing your credit reports without your permission you have the right to opt out of soft inquiries. This means that you will no longer receive pre-approved offers of credit in the mail.
We recently had a reader contact us with a question about inquiries:
Hello – LOVE your blog. Thanks so much for the great info you provide! I just checked my credit inquiries. Sadly, all of them are sitting with Experian. I was always under the impression that inquiries only showed up if they resulted in a card approval. For example, I have 5 Chase inquiries, though I only have 2 Chase cards. Is that true? If so, do I have grounds to dispute the inquiries? Thanks so much in advance for your help.
Thank you for your question. Unfortunately, every time you put in a credit application it results in an inquiry. You may challenge the inquiries if you want to, but if they are legitimate they may not be removed. If you are worried about multiple inquiries lowering your credit score, it would not hurt to go ahead and try to have them removed. Worst case, they stay on your report. Best case, the companies do not verify the inquiries and they drop off. That could end up raising your credit score a little bit.
You also mention something here that we haven’t touched on yet, and that is this: most of your inquiries are listed with Experian. It is worth noting that not all lenders check with all three credit bureaus before making a decision on a loan. In your case, most of the places you applied with checked your Experian credit report.
Each time you apply for credit it’s totally up to the lender which bureau they check with. If you are working to clean up your credit reports, never assume that your report will be the same at all three places. Also, challenging information at one credit bureau does not remove it from the other two. You still have to go through the challenge process with each bureau.
If you want to weigh in and talk about Melissa’s situation, you can check out the ongoing forum post here. If you’d like to ask us a question you can leave a comment below!