When applying for products or services of certain businesses, one of the initial things they do is conduct a credit check report. Reviewing your credit report helps them come to a decision whether to qualify you for your application or not. From lenders, utility companies to insurance agencies and credit card companies, these organizations check your credit report as part of their application process.
Two Types of Credit Inquiries
All the inquiries done in your credit report are recorded by the credit bureaus. You can see them in your credit report as “Inquiries”. Each inquiry made within the last 24 months is listed on your credit report. There are two types of inquiries that can be done on your credit report:
- Hard Inquiries
This type of inquiry is also known as a “hard pull”. It is usually conducted by financial institutions when making lending decisions. A hard inquiry is part of the process when you apply for a credit card, mortgage, auto loans and more. In essence, you have to authorize them for you to get approved. The downside of a hard inquiry is that it can impact your credit, lowering your credit scores a little bit. The record will also typically stay for about two years in your account. However, a single hard inquiry will probably not affect the approval of your application. Nevertheless, you may want to think first when applying for multiple credit cards in one go. Having a number of hard inquiries on your record may give an impression to lenders or credit card issuers that you are a high-risk customer.
- Soft inquiries
This type of inquiry is also known as a “soft pull”. It usually takes place when an individual or company checks your credit report as part of a background check. This may also be used by creditors for marketing to potential customers. An example would be a credit card company scouting for people with specific credit-related characteristics whom they can offer certain deals. Landlords or property management companies also use soft inquiries as part of their property rental application process. If you are a new customer to a utility, phone or internet company, chances are they will run a soft inquiry first before approving your application. Undoubtedly, there are many reasons why this kind of inquiry has to be made, and this can occur without your permission. The good news is that soft inquiries will not affect your credit score in any way.
Is Hard Inquiry Removal Possible?
We have already established that having a hard inquiry in your credit report can impact your credit score. Approximately a one to five points may be deducted from your credit score because of hard inquiries. 10% of your credit report is based on the inquiries made on your credit. When financial institutions see that there are many hard inquiries made on your account, they can become wary about extending you a loan or credit. Hard inquiries have been the deciding factor of financial institutions when it comes to approving new applications. They consider those who have shopped for credit within the past 12 months riskier borrowers than those who have not. If you are looking for favorable loan terms, it’s better to keep your inquiries within a 30-day time frame. All inquiries made within the said time frame are considered as one. In this way, hard inquiries will only have minimal effect on your credit report. Thankfully, there are inquiries that are eligible for removal.
Hard Inquiry Removal Steps
- Check your credit report
Hard inquiries are conducted with your authorization. If the inquiry on your report is because of a loan or credit application, the inquiry will most likely be not removed. However, if you don’t recognize a certain hard inquiry on your report, there’s a possibility that you could have been a victim of identity theft or fraud. This is why it’s important to check all the details on your credit report to verify everything, and most importantly to avoid the negative impact on your credit score.
- Follow up on suspicious inquiries
After checking your credit and identifying a hard inquiry on your account that you do not remember authorizing, you may contact the lender or company associated with it. You can discuss with them the specific inquiry to clarify whether the said inquiry was approved or not. Remember that the Fair Credit Reporting Act, Section 604 states that reviewing a credit report is only allowed if the person has provided the creditor or lender with written authorization. Another circumstance that allows a hard inquiry is if it is court ordered. The state or local government agency can also request for a hard inquiry in relation to child support.
- File a dispute through a letter
If you see a mistake on your credit report regarding the inquiries made, you can write a letter to the credit bureaus. In the letter, you should include the main reason of the letter, the company that requested your details, the reason you’re disputing (typically because of unauthorized activity), and your hard inquiry removal request. If the dispute includes several hard inquiries on your account, it’s suggested to highlight them or make a list for better reference. Before going to the credit bureaus, you can also file a dispute with the creditor or lender to remove the inquiry as a goodwill gesture. A hard inquiry removal may be granted to you if they do not have any documentation or proof of your authorization to check your accounts.
- Wait for the results
The credit bureau will review the details of your dispute upon receiving your letter. Credit bureaus are required to investigate these matters. In addition, they are required to rectify any information that is found to be inaccurate. If upon investigation the inquiry was proven to be unauthorized, the hard inquiry on your credit report can be removed.
Requesting for a hard inquiry removal may be a lot of work. If you believe you will need some assistance, you may consult a professional credit repair company. They can help you review your credit report and guide you in identifying the potential problem areas. By consulting a credit repair company, their experts will know how to deal with your credit report. They may even give you tips on how to achieve a good credit score. Remember that credit scores represent your financial well-being. It needs attention, care and a little bit of maintenance every now and then to keep it stable.