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Understanding Hard Inquiries and Their Impact on Your Credit Score
- Darrin Singer Jr
- Mar 9, 2023
- 7 min read
Updated: Mar 9, 2023
Education
March 8,2023
by: Darrin Singer Jr
Table of Contents
Introduction
When you apply for credit, whether it be a loan, a credit card, or a mortgage, the lender will check your credit history to determine whether you are a good candidate for approval. This credit check is known as an inquiry, and it can either be a soft inquiry or a hard inquiry.
Soft inquiries do not affect your credit score, and they are typically generated when you check your own credit score or when a lender checks your credit as part of a pre-approval process. On the other hand, hard inquiries can impact your credit score and they are typically generated when you apply for credit.
What is a Hard Inquiry?
A hard inquiry is a credit check that is initiated by a lender or creditor when you apply for credit. This inquiry will appear on your credit report and can impact your credit score. The inquiry provides the creditor with a snapshot of your creditworthiness and helps them determine whether to approve your application or not.
Difference Between Soft and Hard Inquiries
Soft inquiries are generated when you or a third-party checks your credit score. They are not initiated by a lender or creditor and they do not impact your credit score. Soft inquiries are typically generated when you check your own credit score, when a lender checks your credit as part of a pre-approval process, or when a potential employer checks your credit as part of a background check.
Hard inquiries, on the other hand, are generated when you apply for credit. They are initiated by a lender or creditor and they can impact your credit score.
When are Hard Inquiries Generated?
Hard inquiries are typically generated when you apply for credit. This can include applying for a credit card, a loan, or a mortgage. Some other examples of when a hard inquiry may be generated include when you apply for a car loan, a personal loan, or a student loan.
Who Can Check Your Credit with a Hard Inquiry?
Creditors and lenders are the primary entities that can check your credit with a hard inquiry. This includes banks, credit unions, credit card issuers, and other financial institutions. Landlords and potential employers may also be able to check your credit with a hard inquiry, but they will typically need your permission to do so.
How Long Do Hard Inquiries Stay on Your Credit Report?
Hard inquiries will typically stay on your credit report for up to two years. However, the impact of the inquiry on your credit score will generally only last for about 12 months. After that time, the inquiry will still appear on your credit report, but it will no longer impact your credit score.
Do Hard Inquiries Affect Your Credit Score?
Yes, hard inquiries can impact your credit score. When a creditor or lender checks your credit with a hard inquiry, it signals to credit reporting agencies that you have applied for credit. This can cause a slight drop in your credit score.
However, the impact of a hard inquiry on your credit score is typically small and temporary. In most cases, your credit score will recover within a few months as long as you continue to make timely payments on your debts and maintain good credit habits.
How Many Points Do Hard Inquiries Affect Your Credit Score?
The exact impact of a hard inquiry on your credit score will depend on several factors, including your overall credit history, the number of inquiries on your credit report, and the type of credit you are applying for.
In general, a single hard inquiry may cause your credit score to drop by 5-10 points. However, the impact of multiple inquiries can be more significant.
When Should You Avoid Hard Inquiries?
While hard inquiries are a necessary part of the credit application process, there are times when you may want to avoid generating them. For example, if you are planning to apply for a mortgage in the near future, you may want to avoid applying for new credit cards or loans, as this can generate multiple hard inquiries and potentially lower your credit score.
Additionally, if you are in the process of rebuilding your credit or have a limited credit history, you may want to avoid generating too many hard inquiries, as this can make it harder to get approved for credit in the future.
How to Dispute Hard Inquiries on Your Credit Report
If you notice unauthorized hard inquiries on your credit report, you have the right to dispute them with the credit reporting agencies. To do this, you will need to file a dispute with each of the three major credit reporting agencies - Equifax, Experian, and TransUnion.
Once you file a dispute, the credit reporting agency will investigate the inquiry and remove it from your credit report if it is found to be unauthorized.
How to Minimize the Impact of Hard Inquiries on Your Credit
While you cannot completely avoid generating hard inquiries when you apply for credit, there are steps you can take to minimize their impact on your credit score. These include:
Applying for credit only when you need it
Applying for credit selectively and only with lenders who are likely to approve your application
Spacing out credit applications to avoid generating multiple inquiries at once
Monitoring your credit report regularly to ensure that all inquiries are authorized and accurate
What to Do if You Notice Unauthorized Hard Inquiries on Your Credit Report
If you notice unauthorized hard inquiries on your credit report, it is important to take action to protect your credit. This may involve disputing the inquiry with the credit reporting agencies, placing a fraud alert on your credit report, or even filing a police report if you believe that your identity has been stolen.
How Credit Repair Can Help with Hard Inquiries
If you are struggling with hard inquiries on your credit report, you may want to consider working with a credit repair company. Credit repair companies can help you dispute inaccurate information on your credit report, including unauthorized hard inquiries. They can also work with the lenders or creditors that made the inquiry to verify its accuracy. If an inquiry is found to be inaccurate or fraudulent, the credit repair company can request that it be removed from your credit report.
It is important to note that credit repair companies cannot guarantee the removal of inquiries, and it is illegal to dispute accurate information on your credit report. Additionally, some credit repair companies may engage in unethical or fraudulent practices, so it is important to thoroughly research any company before working with them.
If you are interested in working with a credit repair company, Total Credit Care Agency is a reputable and reliable option. They offer a range of credit repair services, including dispute resolution and credit counseling.
Conclusion
Hard inquiries are a necessary part of the credit application process, but they can also impact your credit score. By understanding what a hard inquiry is, how it affects your credit, and how to minimize its impact, you can make informed decisions about when to apply for credit and how to protect your credit score.
If you are concerned about hard inquiries on your credit report, the best course of action is to limit new credit applications and be strategic about when you apply for credit. You can also monitor your credit report regularly to ensure that all inquiries are accurate and legitimate.
FAQ
Q: Can a hard inquiry impact my ability to get approved for credit in the future? A: Yes, too many hard inquiries can make it harder to get approved for credit in the future, as it can signal to lenders that you are actively seeking credit and potentially overextending yourself.
Q: Do all lenders generate hard inquiries when you apply for credit? A: No, not all lenders generate hard inquiries when you apply for credit. Some lenders may perform a soft inquiry instead, particularly if you are pre-qualified for an offer.
Q: Will shopping around for rates on a loan generate multiple hard inquiries? A: It depends. If you apply for multiple loans within a short period of time (typically 14-45 days), the credit bureaus will typically count these as a single inquiry. This is known as rate shopping.
Q: How long does it take for a hard inquiry to impact my credit score? A: The impact of a hard inquiry on your credit score is typically immediate, but it will generally only last for about 12 months.
Q: Can a hard inquiry lower my credit score by more than 10 points? A: Yes, the impact of a hard inquiry on your credit score can vary depending on several factors, and it is possible for it to lower your score by more than 10 points.
Q: Can I remove a hard inquiry from my credit report before it falls off? A: No, you cannot remove a legitimate hard inquiry from your credit report before it falls off after two years.
Q: Will a hard inquiry show up on all three credit reports? A: A hard inquiry will typically show up on just the credit bureau that was pulled.
Q: Can a hard inquiry impact my credit score if I am not approved for credit? A: Yes, a hard inquiry can impact your credit score even if you are not approved for credit. The inquiry itself can cause a slight drop in your score.
Q: Will a hard inquiry impact my credit utilization ratio? A: No, a hard inquiry will not impact your credit utilization ratio, which is the amount of credit you are using compared to your total credit limit.
Q: Can a hard inquiry be a sign of identity theft? A: Yes, unauthorized hard inquiries on your credit report can be a sign of identity theft or fraud, and it is important to take action to protect your credit if you notice them.
About the Author:
Darrin Singer Jr. is a seasoned expert in the credit repair and credit consulting industries. With years of experience in the field, he has helped numerous clients improve their credit scores and achieve their financial goals. Originally from Detroit, MI, Darrin enjoys spending his free time reading, learning new things, and most importantly, spending quality time with his family. His passion for empowering individuals to take control of their financial future is reflected in his work and commitment to providing excellent customer service.
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