If you’ve ever shopped for a car, a home, or even a new credit card, you may have seen a hard inquiry appear on your credit report. If you have good credit already, this hard inquiry probably won’t bring your credit score down by more than a few points. But if you’ve shopped around for multiple auto loans, mortgage loans, personal loans, or credit cards over the last several months, you may have noticed more than one hard inquiry on your credit record. Too many hard inquiries in a short amount of time can definitely affect your credit score in a negative way. This may leave you wondering: how long do hard inquiries stay on your credit report? Below, Eric Wilson explains how hard inquiries affect your credit scores, when hard inquiries drop off credit reports, and more.
If your credit score is suffering due to large amounts of debt and multiple inquiries, Eric Wilson can help. He has more than 25 years of experience in helping his clients live debt free lives with excellent credit scores. He can do the same for you too. Call 205-349-1280 to schedule a free consultation today.
What is a Hard Inquiry?
A hard inquiry – also called a credit inquiry, hard credit check, or hard pull – is when a company, credit card issuer, or lender requests to view your credit report. Hard credit inquiries are a normal part of the loan application process for a mortgage loan, student loan, personal loan, auto loan, or credit card. You must give consent before any company or lender requests a hard credit inquiry.
Once you give consent, the loan application process will move forward, and the hard inquiry will show up on your credit report for other lenders and credit card issuers to see.
What is a Soft Inquiry?
A soft inquiry – AKA a soft pull – is when a creditor checks your credit report or credit score. Soft credit inquiries can also occur when you check your own credit report or when you receive a promotional credit card offer.
The main difference between a hard and soft inquiry is that the former is triggered by a home or auto loan application process and the latter is not. Additionally, soft inquiries don’t affect your credit score.
How Do Hard Inquiries Affect Your Credit?
A hard inquiry will affect your credit score, but usually only for a few months. The amount of points a hard inquiry will knock off your credit score depends on the credit scoring model, the length of your credit history, how many hard inquiries you already have on your report, and your overall credit score. However, most people see their FICO score drop only a few points for a short period of time.
If you don’t have good credit and you have multiple hard inquiries on your report already, your credit score may suffer more than just a few points. It’s important to remember, though, that credit scores are largely made up of more important factors like payment history, how much debt you have, whether or not you have a long or short credit history, and credit utilization. In most cases, scoring formulas reflect these factors, not the occasional hard inquiry.
How Long Do Hard Inquiries Stay on Your Credit Report?
Now to the main question at hand – how long do hard inquiries stay on your credit report?
Hard inquiries stay on your credit report for up to two years. Meanwhile, soft inquiries can stay on your credit report for 1 to 2 years. Legitimate inquiries can’t be disputed or removed from credit reports before this 2 year mark unless you have proof that someone else is applying for a new credit card or loan under your name.
Hard Inquiries and Loan Shopping
If you’re looking around for the best mortgage or car loan, you may have to fill out several applications and endure multiple inquiries. The good news is that most credit scoring models list all hard inquiries within 45 days as a single inquiry. In fact, the newest model of VantageScore and FICO ignore multiple hard inquiries for car loans and home loans, as long as they fall within a specific time window. That way, you can shop for a new car or home in peace.
It’s important to realize that not all loan applications and hard inquiries are treated equally on credit scores, especially hard inquiries for personal loans and credit cards. Too many hard inquiries on your credit for these types of loans can indicate to a potential lender that you’re struggling to control your finances. This can greatly jeopardize their potential lending decision with you.
All in all, you should not let the fear of hard inquiries on your credit report stop you from shopping for the right loan. Accepting a poor loan offer in relation to your current financial situation can have devastating consequences in the long run.
How To Reduce The Impact of a Hard Inquiry On Your Credit
Because multiple hard inquiries for new credit cards can have a significant impact on your credit (and won’t be lumped together as one inquiry), it’s important to plan carefully.
Firstly, you should request a free copy of your credit report from one of the three major credit bureaus before you start loan shopping. That way, you can make sure your credit report is accurate and attractive to potential lenders. Having a recent copy of your credit report from a credit bureau can also allow you to look for ways to boost your credit score before you apply for loans. The best ways to fix your credit report and credit score is to make timely payments, keep your credit utilization ratio below 30%, pay off your debt, and ask for a higher credit limit on a credit card.
Next, double check if the type of loan you want to apply for will leave more than one hard inquiry on your credit report within a 45 day window. Applying for multiple credit cards within a short period of time will definitely do this. But applying for multiple auto loans, mortgage loans, and student loans typically won’t.
Call a Tuscaloosa Bankruptcy Lawyer at Eric Wilson Law Today
If your credit is suffering due to large amounts of debt and multiple hard inquiries, Eric Wilson can help. For more than 25 years, Eric Wilson has been helping his clients achieve a life free of financial difficulty through Chapter 7 bankruptcy and Chapter 13 bankruptcy. Not only that, but he has also been helping his clients rebuild their credit after bankruptcy as well. No matter how hopeless your financial situation feels, Eric Wilson can provide compassionate and judgment-free financial advice. Call 205-349-1280 to schedule a free consultation today.