Table of Contents
- 1 What is a Credit Inquiry?
- 2 The Types of Inquiries: Hard v. Soft
- 3 Does a Hard Credit Pull Hurt Your Credit Score?
- 4 Can You Legally Have a Credit Inquiry Removed From Your Credit Report?
- 5 How Do You Remove a Hard Credit Inquiry From Your Report?
- 6 How Long Does it Take to Get Rid of a Hard Inquiry?
- 7 How Do You Monitor Your Credit Reports and Credit Moving Forward?
Your credit scores determine whether and on what terms you can borrow money or otherwise access credit. Banks, finance companies, credit cards, and other creditors set credit limits, interest rates, collateral requirements and repayment based on the scores and other information in your credit cards. A poor score can stunt your efforts to buy a home or car or get a student loan to pay for college.
One factor, albeit small, in your credit score lies in the number of times someone conducts a hard credit inquiry. Even though these pulls don’t drive the math of your scores heavily, they may provide clues to creditors about your credit history — and to you that you might be a victim of identity theft or credit fraud. Below, we explain:
- The meaning of a credit inquiry
- The difference between a hard and soft credit inquiry
- How a hard inquiry may affect your credit score
- How you can remove hard inquiries from your credit report
- How long hard inquiries remain on your report and are used in determining your score
- How you can monitor your credit report and history
What is a Credit Inquiry?
In a credit inquiry, some person or entity pulls your credit report. From the inquiry, the interested party wants to know whether you present a risk of not repaying loans, financial difficulty or irresponsibility, poor job performance or other “red flags” in your background.
Below are some parties undertake a credit inquiry:
- A bank or finance company considering your application for a mortgage, car loan, student loan or other loans
- A credit card company or a department store wants to decide whether to issue you a card or otherwise extend credit
- A landlord determining whether to rent a residence or other premises
- An insurance company
- A prospective employer
- Certain government agencies that provide benefits or issue licenses
The Types of Inquiries: Hard v. Soft
Whether the inquiry is “hard” or “soft” determines whether your credit score may lose a few points.
Specifically, a “hard” pull of your credit report happens when you apply for a loan. That includes a car loan, mortgage, credit cards, student loans or personal loans. For the would-be creditor to get your report, you must specifically authorize it. The consent usually comes via a provision in the application that you allow the creditor to pull your history. In the sense that you may permit an employer or landlord to check your credit report, those pulls may also exist in the “hard” category.
With hard inquiries that affect your credit score, the creditor seeks to determine your creditworthiness or the chances that you will fail to make your payments. To judge your handling of credit, the creditor will review on your report:
- The number of credit accounts you have
- The age of your accounts
- Your payment history, including missed payments and the number of days the payments were late
- Whether any of your accounts have been referred to collection agencies
- Judgments, foreclosures, bankruptcies
- The types of credit or loan accounts
- Balances owed on your loans or credit accounts
- Your credit limits
With the last two items, creditors can determine your credit utilization rate. This represents the ratio of amounts owed to your credit limits. The higher the ratio, the more you appear to be relying on credit for household or daily living experiences. Your balances account for 30 percent of your FICO (which stands for Fair Isaac Corporation) credit score. Payment history makes up 35 percent.
Unlike hard pulls, a soft credit report inquiry does not appear on your credit report and does not affect your credit score. Those who run credit report inquiries do not evaluate your risk of defaulting on a loan or credit card agreement. Often, soft pulls are conducted as a part of a background check in connection with:
- Employment screening
- Vehicle rentals
- Applications for utility or wireless phone service
- Rental applications
Depending on the applicable law, these pulls may occur without your prior consent.
Credit card issuers may do soft inquiries to:
- Determine whether to pre-approve a customer for a credit card offer
- Increase existing customers’ credit lines
In these cases, the credit card company doesn’t obtain your consent for the pull. However, your credit report will not list these soft pulls.
You may pull your own credit report without it constituting a hard inquiry. Clearly, you have many legitimate and important reasons for pulling your own credit history. We will discuss some of those later.
Does a Hard Credit Pull Hurt Your Credit Score?
Yes, but normally not in significant amounts. Usually, each hard credit report pull deducts one to five points from your credit score. FICO bases 10 percent of the score on hard credit inquiries.
The fact that credit scorers and creditors even consider hard inquiries begs the question, why? Remember that a lender or credit card company does a hard pull because you have applied for credit. In other words, you are signaling your intent or plan to increase your debt load.
In this regard, watch how many times you apply for credit. A significant number of hard pulls within a short period of time suggest on your part substantial increases in debt, more difficulty making your loan or credit card payments, or financial problems. Those facing financial stress may turn to credit cards to pay monthly or other bills or meet living expenses. According to FICO, consumers with at least six hard credit inquiries are eight times more likely than those without any inquires to file bankruptcy.
Further, your hard credit inquiries don’t exist in isolation. Your credit report also shows the number of credit accounts and how long you have held them. Hard pulls can count more against you if you don’t have a long track record of handling credit and you have carried just a few cards.
Can You Legally Have a Credit Inquiry Removed From Your Credit Report?
It depends. When you apply for credit, your application comes with paragraph acknowledging your consent to allow the creditor to pull your credit report. When you allow the hard inquiry, you do not have a right to have the credit bureaus remove it from the report. Below, we list the general reasons you can have a hard credit inquiry removed.
How Do You Remove a Hard Credit Inquiry From Your Report?
Do It Yourself in Three Easy Steps
Pull Your Credit Reports
As we said, you don’t generate a hard inquiry by pulling your own credit report. In fact, self-inquiry gives you knowledge of hard inquiries by others and generally items that you might need to contest.
You are entitled to get a free credit report once per year from each of the major credit reporting agencies — Equifax, Experian, and TransUnion. You may request the free reports directly from each of the reporting agencies or going to AnnualCreditReport.com.
If you opt for AnnualCreditReport.com, register with the site. You then choose which reports you wish to obtain. Your options include all three at one time or obtaining each one at different times. The latter option gives you a better chance of capturing inaccuracies, identity theft, fraud or other red flags. Many things can happen in a twelve-month period. If you contemplate a major purchase, such as a home or vehicle, you might need all three at one time if you want to assess your own credit score and reports before you apply for the loan.
In requesting your credit reports, you will need the following information to verify your identity:
- Social Security Number
- Date of birth
- A list of your current mortgages, vehicle loans, student loans, credit cards
- Current and previous addresses, perhaps going back several years
Aside from your automatic yearly free credit reports, federal law entitles you to a free credit report if:
- You were denied a loan, credit card, employment, rental or insurance based upon information in a credit report. Other negative, or “adverse” action includes increases in interest rates or insurance premiums, reductions of credit limits, closure of accounts, job demotions, and lower insurance coverage or benefits. The decision-maker must tell you that the negative action was based on information in a credit report and the credit bureau that reported the information. Request the credit report within 60 days after you get the notice.
- You contend that information on your credit report is wrong because of fraud
- You placed an initial fraud alert with a nationwide credit reporting agency, and you ask for a credit report as part of that alert. If you request an extended fraud alert, you get two additional free reports
- You are unemployed and plan to seek employment within 60 days after requesting the credit report
Those on public assistance or whose state laws provide for the right to a report can request free credit reports.
Reviewing the Report
The credit reports include a section for credit inquiries, hard inquiries or third-party requests for information. You will see:
- The name, address and telephone number of the person or organization requesting your report
- The date of the inquiry
- Comments, such as the reason for the inquiry, whether it was otherwise permissible, and the date it is to be removed from the report
When you review, keep in mind the reasons that you can dispute the hard inquiry:
- Fraud or identity theft
- You did not apply for credit
- You did not authorize the hard inquiry
- You did not know that the organization or person would pull your report
Take notes of any of these organizations that you don’t recognize or with whom you did not apply for credit. Compare the list from the inquiries with accounts listed on it. You may see accounts that you don’t recognize or deny opening or having. Some may match the entities that performed hard inquiries supposedly on you. Also, review your personal files, social media posts, emails or correspondence to see if you have records of applications or transactions with those who have pulled your reports.
Dispute the Erroneous Credit Pull
To dispute the hard inquiry, file a dispute with the credit bureaus that have reported it.
These agencies offer online options to report your dispute. However, you should send the bureaus a certified letter setting for your dispute. If you rely upon an electronic submission, you might face the uncertainty that the bureau actually received it. This may be especially due to technical problems that prevented the submission of the dispute, even though you sent it. With a certified letter, someone at the credit bureau signs for your letter and supporting documentation and evidence that it was received.
The Federal Trade Commission provides a sample guide letter for you to use with credit report disputes. In your letter:
- Identify expressly the name, address and phone number of the person or organization that make the inquiry
- Identify the date of the inquiry as shown on the credit report
- Explain the reason you dispute the hard inquiry
- Specifically, request that the credit bureau investigate your dispute
Provide copies of any documents that you believe support your dispute. You will need to keep the originals for reasons such as court or for use by any administrative agencies that enforce credit reporting laws.
If you believe that you have been victimized by fraud or identity theft, file a report with your local law enforcement agencies. You may report to the Federal Bureau of Investigation’s Internet Crime Complaint Center any claims that you have been a victim of online fraud. Attach copies of your report to law enforcement or the Internet Crime Complaint Center to your dispute letter.
Copy by certified mail the person or organization that made the disputed hard inquiry with what you send to the credit bureau. Send a transmittal letter to the furnisher of the information, using a sample letter from the Federal Trade Commission. By telling the furnisher directly, you impose a duty on the furnisher to inform the bureau if the hard inquiry information is not correct.
Once the credit bureau finishes its investigation, it must correct anything found to be erroneous and send you a free credit report with the corrected information. If the credit bureau determines that the information is correct or that there is not a sufficient basis to change the report, you may request that the bureau note that you dispute the hard inquiry.
Credit Repair Organizations
You may consider turning to a credit repair service to perform the legwork in contesting hard inquiries on your credit report. If you do so, keep in mind that you have important rights and these companies have obligations under the Credit Repair Organizations Act. As such:
- Get a written contract that explains specifically what the repair organization will do and the fees
- Do not pay upfront. Credit repair organizations may not demand or collect payment until they have completed the contract
- Avoid accepting promises that the organization can eliminate hard inquiries to which you consented
- You may cancel the contract with a credit repair organization within three business days after signing it
How Long Does it Take to Get Rid of a Hard Inquiry?
Credit bureaus generally must complete their investigations within 30 days after receipt of your dispute.
Even if the dispute does not remove the hard inquiry, the lapse of time will ultimately result in its disappearance. Specifically, hard inquiries remain on your credit report for two years. Credit scorers only consider valid hard inquiries for one year from the date of the initial pull.
How Do You Monitor Your Credit Reports and Credit Moving Forward?
Regular Credit Report Checks
Once a year, you have the right to a free credit report from Equifax, Experian and TransUnion. To monitor your activity as much as possible, you may order one report from each of these agencies over intervals of time, such as every four months. If you want reports beyond the three free ones each year, you can order reports from each of these agencies for a maximum fee of $12.50 per report.
Your ability to dispute errors on your credit report may turn on how well you organize and maintain records. If you keep meticulous and easy-to-locate files and papers, you are more likely able to deny that you applied for or have a particular loan or credit card.
In organizing your credit files:
- List all the loans and credit cards for which you have applied, hold or have held (even if you later closed or paid off the account). A spreadsheet that lists the accounts, address of the creditors and when you opened or applied makes this information readily available to you.
- Prepare a folder to file papers for each of the accounts you list.
- Place all applications, approvals, statements, and notices for each of your accounts in the folder. Print out any online activity, such as applications, payments, and closings of accounts.
With a credit freeze or security freeze, you prevent creditors (other than your existing ones or those trying to collect a debt from you) from being able to see your credit report. The freeze serves to prevent identity thieves from opening credit cards or obtaining loans in your name. When someone applies for credit in your name, the prospective creditor cannot perform a hard pull of your report with the freeze in place. As a result, the creditor does not have a credit score or other information on which to approve the loan or credit application.
A credit freeze does not harm your credit score. However, you may need to lift the freeze either temporarily or specifically as to any creditor from whom you seek credit, landlord, rental car company or employer.
You obtain security freezes on request to the credit reporting bureaus. You may write to them or request the freezes online.
Stopping Pre-Screened Offers
Pre-screened offers generate soft inquiries, which do not affect your credit score. However, you might have other reasons to not receive them. Cyber hackers and thieves roaming mailboxes can steal your name, address and other information to obtain credit in your name. You might also want to avoid the temptation to accumulate more debt if you’re trying to improve your credit scores and overall financial situation.
To stop the prescreened offers, you may register your wish through OptOutPrescreen.com or by calling 888-5OPTOUT.
Consumers might find they have unwittingly applied for credit or consented to a hard pull of their credit report. These tactics may take the form of having customers apply for rewards, discounts or other programs through the retailer or financial institution. With the customers’ information, employees of banks, retailers or other card issuers apply for credit in the names of unsuspecting customers. Those applications then generate hard inquiries.
Also, beware when you click on a social media page or Internet site offering you information on how to save money, getting rates or loan programs. The very fine print on the site may obscure the fact that you’re applying for a credit card or consenting to a pull of your credit report.
Some businesses may mislead consumers into believing that federal or other law actually requires a credit check as a condition of purchase. Federal and state laws usually apply the mandate for pulling a credit report to a government benefit program or obtaining a license to engage in a particular occupation or profession.
Whether you wish or need to remove hard inquiries involves a consideration of the time, effort and perhaps expense needed. As a general rule, a hard credit report pull doesn’t significantly lower your credit score. A number of hard inquiries in a short time may indicate to creditors that you are relying too heavily on credit for purchases or meeting the cost of living.
However, you should not ignore hard credit report pulls. Those that appear on your report may raise warnings of identity theft and other fraud that can damage your credit much more than a few points being shaved from your credit score.