Credit Reports & Scores
What is a Credit Inquiry & Does it Affect Your Credit Score?
Part of the series: Credit Scoring 101
Apr 5, 2021 8 min read
SUMMARY
- There are two types of credit inquiries: hard and soft.
- Hard inquiries occur when a lender is pulling your credit file to determine whether to extend you credit after you apply for credit. Hard inquiries have a small and temporary impact on your credit report.
- Soft inquiries occur when your credit is pulled for other reasons, like job offers, account maintenance, or credit prequalification. Soft inquiries do not affect your credit score.
What is a credit inquiry?
A credit inquiry is a record of when your credit report was provided by the credit bureau to someone, say a lender, landlord, employer, or government entity. This record will show the date the report was provided and to whom it was provided.
What is the difference between a hard and a soft inquiry?
The main difference between a hard and soft credit inquiry is the purpose of the inquiry. A hard inquiry is used to make a decision as to whether to extend credit to you at your request — so it will temporarily impact your credit score and will appear on your credit report.
Soft inquiries do not impact your credit score and are used when your credit report is reviewed for other legally allowed reasons that aren’t directly related to issuing credit. Examples of soft credit inquiries include:
- You check your own credit report
- You seek preapproval for a loan or credit card or apply to prequalify for credit offers
- One of your creditors checks your report
- An insurer pulls your credit for a quote
- A company views your credit report for a background check
Can I prevent lenders from looking at my credit report?
There are things you can do to prevent lenders for accessing your credit in some circumstances. For example, you can place a freeze on your credit. This means a credit report will not be provided to any lender until you remove the freeze with the credit bureau — even if you’re applying for credit. You can also prevent prescreened offers with a request to the credit bureaus or by visiting https://www.optoutprescreen.com/. (Reader Note: opting out of prescreen offers requires your personal information, including name and address.)
Is OptOutPrescreen.com legit?
Yes, this site was developed by four credit bureaus to make it easy for consumers to opt out of prescreen offers. The site asks you to provide your name, address, and social security number so it can match your request to your credit profile. Your social security number is not required but is helpful to ensure matching.
Should I opt out of prescreen offers?
This is a personal choice. Prescreen offers can be beneficial to many consumers, and you may be able to get the credit you need from one or more of the offers. On the other hand, if you don’t need credit or don’t want all of that mail coming to your home, you could opt out.
What happens if I have a freeze on my credit and I apply for a loan?
Having a freeze on your credit report means that no one can pull your credit for any reason. Just keep in mind that if you apply for a loan without removing the freeze and a lender attempts to pull your credit, they will be unable to and will likely decline your loan application.
When should I dispute a credit inquiry?
If you believe a hard inquiry is inaccurate, you should dispute it. Because inquiries are simply a record of when your credit was provided to the lender listed on the date noted, there are typically only two reasons why it would be inaccurate. The first is fraud, where someone else is applying for credit using your name. The second is a mismatch of data where another person with a similar name and address was mistakenly matched to your credit report. You cannot dispute soft inquiries, as they are an informational record.
How important are credit inquiries to a credit score?
Usually inquiries have a small impact on your credit score and typically will not influence your credit score more than 10 to 20 points. If you have numerous inquiries within the last few months, or repeatedly apply for credit, the impact could be higher. The impact fades with time and FICO® does not even consider inquiries that are more than 1 year old.
How many hard inquiries are too many?
It depends. If you’re looking for a home or a new car, then you may have several inquiries in a short time period. Most credit scores see this activity as rate shopping and will count them as a single inquiry. Excluding rate shopping, having one hard inquiry every 4 to 6 months should have very little impact on your credit score.
How long do inquiries stay on my credit report?
Inquiries remain on your credit score for two years. More importantly, FICO® credit scores only consider inquiries for one year. VantageScore® does not state how long an inquiry is considered in your credit score but has stated “a credit score that’s lowered by a hard inquiry generally will increase back to its pre-inquiry level in just a few months – provided no new negative information is added to your credit files.” [https://thescore.vantagescore.com/article/110/did-you-know-which-inquiries-can-impact-your-credit-scores]
What do I do if I don’t recognize an inquiry on my credit report?
Sometimes it’s hard to identify the lender on your credit report because the company name may be different than the brand. The first step is to double check your records to verify if you applied for credit on that date. If you believe the inquiry is not yours, you should dispute it with the credit bureaus. It’s a good idea to place a temporary freeze on your credit report to protect your identity until you can determine why the unknown inquiry appeared on your credit report.
Can I get credit without an inquiry?
There is a growing trend by some lenders to use bank data (e.g. your checking account details), social media profiles, or other data to determine whether to lend money to an applicant. Also, some subprime lenders (like companies that provide payday loans) may not pull a traditional credit report. Most lenders still pull a credit file for applicants.
Why do I all of a sudden have a bunch of hard inquiries?
If you haven’t applied for a loan recently, it could be a sign of fraud. Another possibility is that you applied for credit at a single place (like a car dealership) and they shared your information with multiple lenders who each pulled your credit in an attempt to get the best rate and terms for you.
About the author
Nathan Foley questions everything — and thinks you should too. As Elevate’s resident mathematician, he pores over datasets to find the truth amid the fluff and translates insights into ideas for improving personal financial resilience.
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