When you apply for a loan, you usually authorize your creditor to access your credit report and this is what we call credit inquiry. A credit inquiry is listed below your credit report and allows your creditor to see how many times you have requested credit from lenders.
The credit inquiries damage your credit score. Even though the damage is a small one, but a step backward is a step backward. The loss in credit score depends immensely on the credit pulls that you receive. The effect gets neutralized over a period of time, but one should know the methods to remove inquiries fast.
Types of credit inquiries:
The are two types of credit inquiries:
The hard pulls occur when you request for a loan and your lender inquires about your credit score to assess your ability to pay debts and the interest rates applicable. The hard pulls also happen when you apply for an increase in credit card limit. These pulls stay on your report for 2 years and dent your credit score.
A soft pull is a minute inquiry which does not damage your credit score. This pull is usually a background check on your own initiative or an employment background check.
Why these credit inquiries affect your score?
When a lender finds multiple inquiries on your credit report, he might think that you are requesting credit everywhere because you need credit for a living and paying expenses. This indicates financial trouble and inability to pay debts.
Moreover, when your credit inquiry is a newer one, your prospective creditor might think that you have applied for the loan, got the loan and the credit did not show up on the report. He might think that the information is vague and reject your credit. These uncertainties are then reflected on your credit report and damage your credit score.
For how much time will your credit score suffer?
Fortunately, the credit score starts recovering after a period of 6 months and completely recovers after a period of 12 months. But for this one whole year, your creditor will see the transaction on your credit report.
When you are inquiring for one specific loan or searching for the best possible interest rates available in a shorter period of time, your credit report will incorporate the multiple inquiries as a single one.
How many inquiries should you have on your credit report?
The inquiries damage your credit score. So it is advisable to have just one or two inquiries per year.
The life is unexpected in every race. You might need a loan in emergency and this might appear in your credit report. We will advise you to apply for the same type of loan which you have already applied for.
How to remove inquiries quickly?
- Get copies of credit reports:
You can get a copy of your credit report free for once each year. Request copies from all three bureaus and reconcile your reports. The information may vary and you might apply for a change.
- Review your report:
Reviewing the report revolves around your seeing the inquiries section and finding out whether the inquiries are the ones you made. You might occasionally find an item which you never authorized.
- Contact bureaus:
Contact your credit bureau to find out the creditor whose inquiry is appearing on your report. Call or write to the creditor to either verify their inquiry or remove it from your report.
- Follow up:
Wait for the creditor’s response for 30 days. If the lender does not reply you in 30 days then warn them that you will tell the authorities. Keep a strict documentation of your written and oral communications.