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Credit Inquiries
What are credit inquiries and how does it work? Are credit inquiries bad for your credit profile? Why do lenders frown on credit inquiries? Can you get credit inquiries removed from your credit report? How long do credit inquiries stay on your credit report.
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Credit inquiries are requests for your credit report. There are two main types of credit inquiries: hard and soft credit inquiries. Here’s how they work and what they can do to your credit profile:
Hard Inquiries: What They Are: Hard inquiries occur when a lender or creditor checks your credit report as part of their decision-making process for credit applications such as a loan, mortgage, or credit card.
Impact on Credit Profile: Each hard inquiry may temporarily drop your credit score by a few points. If you have many hard inquiries within a short period, it might signal financial distress to lenders, further affecting your creditworthiness. The reason why your credit scores temporarily drop with hard inquiries is because creditors see it as you are overextending yourself. The impact on hard inquiries will diminish as the credit inquiries season and time passes.
Why Lenders Frown on Them: Lenders may interpret several hard pulls as an indication that you’re looking for too much new debt at once. This could be seen as risky behavior and may suggest overextension or financial instability.
Duration on Credit Report: Hard pulls generally appear on your credit reports for about two years, but their effect on scores fades after a couple of months.
Soft Inquiries: What They Are: Soft inquiries occur when you check your credit report or when a lender checks it for preapproval offers or background checks not initiated by you in response to an application you’ve made.
Impact on Credit Profile: Soft credit pulls don’t impact the above. Therefore, you don’t worry about them hurting your scores!
Duration on Credit Report: These types stay visible for two years like their “hard” cousins but do not affect this history (or the ability to get new lines).
Can You Get Credit Inquiries Removed?
Hard Inquiries: Getting rid of hard credit inquiries isn’t easy unless there’s been some mistake – unauthorized activity, etc.- which gives grounds under FCRA Section 609(e). So, if someone else applies fraudulently, disputes would need to be filed against bureaus along with police reports, etc., proving innocence; otherwise, all we can do is wait until they drop off naturally.
Soft Inquiries: Since there is no impact on your credit score, do not worry about removing them.
General Advice
Limit Hard Inquiries: To keep your credit score from dropping too much, apply for new credit only as needed and avoid anything that would set off warning bells (like many applications within a short period).
Check Your Credit Reports: Check your credit reports regularly to see if all the inquiries listed are ones you authorized. AnnualCreditReport.com lets consumers get free copies of their reports from Equifax, Experian, and TransUnion each year.
Knowing about credit inquiries can help you manage your credit better and make smarter financial choices.