How Do Hard Inquiries Affect Your Credit Report?

Unless you’re using a credit monitoring service like SmartCredit®, you might only be using your one free credit report a year from each of the three main credit reporting bureaus to stay up to date. Lenders and issuers, on the other hand, can be making hard (or soft) inquiries on your report more frequently, so it’s important to know what they’re looking for, when they’ll pull your report, and what you can do to prepare. Here’s everything you need to know to understand hard inquiries on your credit report. 

What Is a Hard Inquiry? 

Lenders will make a hard inquiry or “hard credit check” on your report in order to assess your creditworthiness. It gives them a fuller picture of your credit history than the credit score alone, allowing them to see your payment history, credit utilization and more. It is extremely unlikely that any lender will offer a mortgage, car loan, credit card or similar product without first performing a hard inquiry on your credit report. 

How Do Hard Inquiries Affect Your Credit Score? 

Unfortunately, peace of mind for the lender comes with a little piece of your credit score for you. Typically, a hard inquiry will reduce your credit score by 5 points, although it’s only temporary. If your credit report is in good shape overall, with a solid payment history, prudent credit utilization and accurate, up-to-date information, then a single hard inquiry is unlikely to cause any problems. Lots of hard inquiries within a short period, however, can set alarm bells ringing for lenders. That’s why you should avoid applying for a new credit card more than once every six months, for example. 

How Long Does a Hard Inquiry Last? 

You’ll see hard inquiries listed on your credit report for 24 months, but only those made within the previous 12 months will actually impact your credit score.  

Can You Get Hard Inquiries Removed? 

Hard inquiries cannot be made without your approval — usually when you are about to formally apply for a loan — and there is no way to “game” the system by removing them from your credit report once you’re done. On the other hand, you are perfectly entitled to remove those that are erroneous, duplicated or made without your consent. Bear in mind that unfamiliar hard inquiries on your report can be an early sign of fraudulent activity, so it is good practice to query any hard credit checks you don’t recognize. In some cases, the name of the financial institution may be different, for example where a retailer outsources its credit checking service, but it pays to be suspicious until you can correctly identify the source of each hard inquiry. 

How Do You Fix Too Many Hard Inquiries on Your Credit Report? 

When a lender sees a high volume of hard inquiries on your credit report within the last 12 months, they might conclude that you are overstretching your credit use instead of managing your credit lines sensibly. With that in mind, you want to substitute hard inquiries for soft wherever possible. In practical terms, that means using pre-qualification tools to establish whether you need or will get a new loan, credit card or mortgage. Soft inquiries, after all, do not affect your credit score. Prevention is better than cure. Since you cannot usually remove hard inquiries from your report, the best tactic is to preempt any hard credit checks that you don’t need — taking advantage of the fact that only you can authorize each one. 

There’s an easy way to stay one step ahead of hard inquiries. Use our credit monitoring tools and credit report service to give yourself the clear, transparent picture that your potential lender enjoys and keep unnecessary hard inquiries off your report. 

References:

Forbes – How To Remove Hard Inquiries From Credit Reports

Chase – How Hard and Soft Credit Inquiries Affect Your Score