What You Need to Know About Damage Caused by Hard Inquiries

Every time a business or creditor looks at your credit report, a new credit report inquiry will appear in the dedicated inquiries section. Not all are inquiries are the same, but all types of inquiries are shown on your report. The problem is that hard inquiries affect your credit score directly. So, review what you need to know about the damage caused by hard inquiries because it’s important to understand what they are. Applying for a credit card, a job, utilities, or a mortgage means you allow lenders to ask the credit bureaus look at your report. That examination becomes an inquiry - a negative mark that can have a large impact on your scores, especially if you have a short credit history or very few accounts. Damage Caused by Hard Inquiries Only hard inquiries appear to have an impact on your credit rating. Your credit score will be affected by hard inquiries for at least a year. However, both hard and soft inquiries remain on your report for up to two years. In fact, hard inquiries represent 10% of your overall credit score, and having too many of them can damage your credit score by dropping it significantly. Funding application denials are a common side effect of multiple hard inquiries because lenders tend to think you are desperate or irresponsible with your money. There are also other factors that come into play when looking at the damage caused by hard inquiries. They won´t always negatively affect your credit score by themselves. Other determining factors include the number of accounts you have open, the time since you set up your last account, and the time since your last inquiry was made. There is less damage to your credit score when it’s been a while since your last inquiry. If you are planning to use your credit score for something important, try to keep your applications for credit to a minimum to protect your delicate score of a damaging drop. Larger numbers of hard inquiries are seen as a sign of risk to lenders - indicative of future default or bankruptcy. Statistically, if you have six inquiries or more on your credit report, you are far more likely to declare bankruptcy than consumers with none. The Difference between Soft and Hard Inquiries Soft inquiries don’t appear on the version of your credit report that is seen by creditors. However, they are likely to appear on your file when lenders periodically review your credit standing as a borrower to decide whether to offer credit limit increases, additional products, and/or pre-screened offers for credit. Insurance companies also access your credit report to calculate coverage rates, and marketing mail lists do too. Soft inquiries are created when you review your own report as well. On the contrary, when shopping for an auto or mortgage loan, you may see many inquiries on your credit report as lenders try to qualify you for the loan. The good thing is that loan shopping is usually treated as a single inquiry if they are made within a 14 to 45-day timeframe. However, the credit scoring model used to evaluate your credit score is often a determining factor. The Fair Credit Reporting Act places restrictions on when and how credit reports may be pulled. A soft pull, or soft inquiry, doesn’t affect your credit score as much as hard inquiries do. New credit applications result in hard inquiries, and those count negatively toward your FICO score. In some cases, a creditor may explain which type of inquiry will be submitted so you can decide if you want to proceed or stop the request. How Many Inquiries Does It Take to Affect a Credit Score? A hard inquiry always pops up when you apply for a mortgage, an auto loan, a credit card, or a student, business, or personal loan. Each one can shave off between 5-10 points from your FICO score. If you rent a car, apply to rent a house or apartment, sign up for Internet service or cable TV, or open a new account, there’s likely someone checking your identity and credit report. In general, these events result in either a soft or hard inquiry, depending on the circumstances of the application. Most of the scoring model systems recognize borrowers who shop around to find the best offers. New credit applications are not the same, and the damage caused by a single hard inquiry can lower your credit score by several points. Try not to randomly apply for new credit cards while you shop for rates. Luckily, single inquiries won’t make a significant change to your credit score if you maintain your report and refrain from making late payments and keeping high debt levels. Don’t worry about having your credit pulled once in a while, but if you feel your credit report is full of inquiries get them removed as soon as possible. Reputable companies like InquiryBusters.com can get your credit report cleaned and ready.

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