A credit inquiry is made when you are seeking credit in the form of a loan, credit card, or any other type of credit. When a request for a credit is made, this inquiry is necessary for the lenders to know well about the financial conditions of the borrower and to minimize loss.
Although it is a necessary part of borrowing, too many credit inquiries can be bad for your credit score and the credit report.
What is a Credit Inquiry?
A credit inquiry is made by a lender when the borrower wants a credit. For this inquiry, your credit report is inquired, and only after this procedure, a loan might be lent to you.
A credit inquiry might also be made by other institutions or people who have to know about your financial situation ahead of lending or having dealt with you. For example, a landlord or an employee.
Types of Credit Inquiry
A credit inquiry can be of different types but the two main types of credit inquiries are- Hard Inquiry and Soft Inquiry.
Both types of inquiries have negative effects on your credit report but a soft inquiry has less effect than a hard inquiry.
1. Hard Inquiry
A hard inquiry is usually made when the lender or the company needs to know about your total financial situation and wants to analyze if you’ll be able to handle or pay back the money on time or not.
A hard inquiry is made by providing the lender your complete credit history. The dealings in your past, your payments, the loans you might already have, and any other form of credit that you might have available for this type of credit inquiry.
This type of Inquiry is made by lenders, student loan lenders, credit card companies, mortgage companies, etc.
2. Soft Inquiry
A soft inquiry can be made for many different types of reasons one of which can be for marketing purposes.
This inquiry might be made for marketing reasons like inquiring to know if a person would be worth having a credit card or to help find a loan.
A soft inquiry doesn’t have that much effect on the credit report as a hard inquiry.
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Why Are Credit Enquiries Bad For Your Credit Score?
Indeed credit inquiries can affect your credit score if it is a hard inquiry. That could negatively reflect your credit report. One reason for this is that if you have just recently applied for a loan or credit, you could be viewed as risky to give credit to. This is more pronounced if you have large credit balances to pay, or if you have acquired large loans. In some cases, the hard inquiry may stay in the report for up to 2 years. But there are cases when the negative information may be prevalent for 7 to 10 years.
Effect of Credit Enquiries as a Co-Signer
If you are one of the co-signers in the credit or loan application of other people, your credit score may be affected. Co-signing essentially means you are taking full responsibility that the borrower will repay their debt in time and in full. If you are co-signing for a loan, the information will show on both your credit report as well as the borrower’s credit report. So, co-sign only when you are sure about the other person’s capability to pay back.
How to Remove Inquiries from Credit Report?
A credit inquiry might not be a very significant thing to be removed from your credit record especially if you are already having other issues that are affecting your report and credit score but if you are aiming for a really good credit score then this one becomes a must to be removed. Removing credit inquiries becomes especially important in case of identity theft.
To let you know, the inquiries that can be removed from your credit report are the ones that are hard inquiries that are not related to you and are conducted without your knowledge. Such inquiries can be removed but an inquiry that has been conducted in your knowledge cannot be removed just like that.
- One of the methods to get an unauthorized credit inquiry removed from your credit report is by contacting your lender or creditor by letter. The main should contain your concern and should point out the inquiry you are claiming to be unauthorized.
- Another way can be to contact the three credit bureaus requesting to remove an unauthorized inquiry from your credit report.
- Along with a report, it’s better to attach a copy of the page of the report that you are indicating to have an unauthorized inquiry.
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In some cases, it is also known as a security freeze. If you freeze your credit report, it will not be accessible to any lender or creditor. This is a good way to keep hackers and other malicious individuals from taking loans in your name. But note that if you do implement a credit freeze, it might impact your ability to take loan or credit as well. Through the credit bureaus, you can either temporarily or permanently lift your credit freeze. In order to get started, contact one of the three official credit bureaus.
It is inevitable to maintain a good credit score if you want to acquire loans or credit. So, you need to ensure that the information in your credit report is correct, accurate and up-to-date. You can soft-inquiry your own credit report occasionally to ensure this. But note that hard inquiries will affect your credit score. Ensure that if you are taking loans or credit, you are in a good financial position to pay. If you are applying for a credit card, it helps to choose one that provides maximum benefits and rewards in the areas you usually spend.
Frequently Asked Questions
How many points does the credit score fall in case of a credit inquiry?
About five points for a Soft Inquiry and about ten points for a Hard Inquiry.
How many credit inquiries on your credit report are considered bad?
Having about six or more credit inquiries can lead you to be declared bankrupt much faster than the people with less than six credit inquiries.
What is a Credit Plus inquiry?
A credit plus inquiry is a reseller of credit information that inquires about the request of mortgage lenders. It is a type of hard inquiry that’s made usually when you apply for a home loan.
How long does it take for your credit score to go up after a credit inquiry?
After a credit inquiry, it might take anywhere from 15 – 50 days for a credit score to go up.
How long does a credit inquiry last?
A hard inquiry may last about two years before they fall off your credit report.