A lender will check one or more of your credit reports when you apply for a new line of credit or loan, which is known as a hard inquiry or a hard pull.
If a creditor sees too many hard inquiries on your file, they can view it as a red flag. The more hard pulls on your credit report, the more they are likely to assume that you are trying to borrow money you can't afford to pay back.
When you apply for a new line of credit, such as a credit card or a loan, a hard inquiry occurs. Also referred to as a “hard pull” or a “hard credit check,” this means that the lender has requested to look at one or more of your credit reports.
Creditors and lenders want to look at your credit file before extending credit or lending money to you because it allows them to assess how much risk you pose as a borrower.
When a hard inquiry occurs, it shows up on your credit report and can have an impact on your score.
Hard inquiries usually stay on your credit report before they naturally fall off.
What happens when an account is closed when you still owe money? Take a look at this post about what happens if a credit card is closed with a balance.
Lenders and creditors can also do something known as a “soft pull” or a soft inquiry. Here are the major differences between hard and soft pulls:
Are you motivated to improve your credit score and reports? Check out our guides to removing evictions from your credit report, opening a new credit card, removing late payments incurred during the pandemic, and hiding credit card utilization.
Hard inquiries usually only impact your credit for a few months, but during this time they will have a negative impact on your score. Though they stop having an influence on your actual score after a few months in most cases, they will remain listed on your credit report for two years until they fall off.
If your credit report shows that you applied for a number of loans and credit cards during a short period of time, this can have a negative impact on your credit and signal to potential lenders and creditors that you might be seeking loans and lines of credit that you might not have the ability to repay.
You can’t always avoid hard inquiries– they are a necessary part of the process of applying for an auto or home loan.
In these scenarios, credit bureaus are aware that consumers will frequently apply to a number of lenders in order to compare rates. This means that several inquiries made within a 14-45 day period for one type of loan won’t penalize your score and are often treated as one inquiry.
On the other hand, if you apply for a number of personal loans and credit cards during the same short period of time, they won’t be treated as one inquiry and is often viewed as a red flag that you’re applying for credit you can’t actually afford.
In most cases, you can only remove hard inquiries on your credit report if they are a result of fraud. For example, if a person opens a new account in your name using personally identifiable information like your Social Security number, you can dispute the hard pull and have it removed.
There are two reasons you can request to have hard pulls removed from your credit reports:
Hard inquiries that you approved or that resulted from an application you submitted, you can’t remove them.
Improving your credit has many benefits, including making it easier to borrow money and give you access to better interest rates on loans. For this reason, it can be quite tempting to try and remove hard inquiries from your credit report to try and boost your score a bit.
The reality is, though, that you can only really dispute hard pulls that result from fraud or an error. If a hard inquiry is legitimate, you will need to wait for it to fall off naturally after two years.
Hard pulls usually only drop your score by a few points and only for a short period of time– so you typically don’t have to worry too much about them. In most cases, hard inquiries will only have an impact on your credit score for a few months.
If there are a lot of hard inquiries on your report, though, one new inquiry could have a negative impact on your ability to be granted a new line or credit or loan, or it could impact the terms you are offered. Similarly, one new hard pull can have an unfavorable effect on your credit if there are other, more serious issues that are hurting your score.
If there are illegitimate hard inquiries on your report, you will absolutely want to get them removed. In the next section, we’ll look at the steps you’ll want to take.
Checking your credit report regularly is important in order to ensure that there aren’t any errors. If you notice a hard pull that you didn’t approve, you can file a dispute with Equifax, Experian, and TransUnion– the three credit reporting agencies.
There are a few reasons a hard inquiry might show up on your credit report even if you didn’t authorize it:
If you believe that someone has stolen your identity and that is why the inquiry is on your report, there are a number of steps you can take to protect yourself:
If an unauthorized inquiry showed up on your account, here’s what you’ll need to do:
You can file a dispute with the appropriate credit bureau by using their online system, disputing the inquiry over the phone, or mailing a letter. The Federal Trade Commission offers a sample dispute letter that you can use if you are going to be sending the dispute through the mail.
Your dispute letter should include:
You’ll want to send this letter by certified mail and select the option “return receipt requested.” This way, you know that they receive the letter and it didn’t get lost in the mail.
Seeing a hard inquiry that you don’t recognize on your credit report can be a truly distressing experience. The last thing anyone wants to deal with is identity theft. That being said, there are a number of reasons why a hard inquiry might show up on your report that weren’t caused by fraudulent activity.
Here are some examples of reasons why a hard pull might be on your report that you don’t recognize:
If you see a hard pull on your report with a company name you don’t recognize, contact them. They will be able to provide you with more information.
Are you motivated to fix your credit? Check out our recent posts about whether installment loans can help rebuild bad credit.
When you are preparing to apply for a loan or a credit card, it can be distressing to look at your credit report and see marks that you know a creditor will see as negative. At the same time, a lot of recent hard inquiries can have a notable impact on your credit score in a way that can affect your ability to borrow money or the terms you are offered.
If you see a hard inquiry on your credit report that you believe is an error or the result of identity theft, you can connect with the credit bureaus in order to have the problem fixed. If it was the result of fraud, you'll also want to take additional steps to ensure that your identify and private information is protected.
There are three national credit reporting agencies-- Equifax, Experian, and TransUnion. You can get a free copy of your credit report from each credit bureau from AnnualCreditReport.com, a site authorized by Federal law.
Unfortunately, it is difficult if not impossible to remove hard inquiries when they are accurate. The good news, though, is that they usually only remain on your credit report for two years and their impact on your score decreases over time.
If you have an extra hard inquiry or two on your credit report, most lenders aren't going to turn you away. Lots of hard inquiries or other more serious issues that are harming your credit, however, can be a red flag to creditors.
For more information about how to improve your credit file and rebuild your credit, make sure you check out our credit building blog.
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