Improving your credit score is a multi-faceted task that can take a lot of time and attention to detail. However, having the best credit score possible is a must for securing a mortgage, getting great interest rates, and dealing with emergency financial situations.
Inquiries are one of the many items that negatively impact your credit score. Here’s what you need to know about inquiries and how to remove them from your report.
Where do Inquiries Come From?
An inquiry occurs when someone pulls your credit report to approve you for a loan. Some common examples of inquiries include:
- Applying for a mortgage
- Buying a car
- Getting a new credit card or line of credit
- Applying for certain jobs
- Signing a mobile phone contract
- Signing a tenant’s agreement
Basically, any situation in which a credit score check is required will result in an inquiry. However, there’s a difference between how specific inquiries affect your score. While some register as a negative item, others don’t have an impact.
Understanding Hard Inquiries vs. Soft Inquiries
Hard inquiries are the credit pulls that will impact your score. The logic behind this effect is that you need to borrow money, which flags your credit report.
Soft inquiries, on the other hand, don’t have an impact on your report. These take place when you request your credit report for review or when a lender pre-approves you for an offer. For example, when a credit card company contacts you to say that you’ve been approved for more credit, they’ve completed a soft pull.
Your approval is required to conduct a hard inquiry— keep that in mind when reviewing your credit report.
Removing Inquiries from Your Credit Report
It’s important to understand that you won’t always be able to remove a hard pull from your credit report. While having a good credit score is fundamental for success, a hard inquiry belongs on your report if it was legitimate.
However, there are cases when hard inquiries aren’t legitimate. If you didn’t authorize a hard inquiry or it was entered erroneously, you can file a dispute to have it removed. For example, if you didn’t reach out for any form of financing and discovered that your credit card company did a hard pull without your permission, you can fight back.
An unauthorized hard inquiry could also be a sign of identity theft. If you aren’t familiar with the item on your credit report, look into it as soon as possible. If you discover fraudulent activity, report it immediately, and freeze your credit.
How to Navigate Inquiries Going Forward
While a hard inquiry impacts your credit score, it’s not the biggest offender. Things like late payments, collections, and high debt ratios will have a more considerable impact on your score than a few inquiries. Furthermore, hard inquiries will be removed from your credit report in one to two years. If your priority is to improve your credit score as effectively as possible, start by reducing debt and making minimum payments on time. If your budget permits, pay more on the highest interest rate item to reduce your debts faster.
Even so, it’s wise to take a strategic approach when using hard inquiries. Narrow down your loan provider options, rather than allowing various credit report pulls while you search for a mortgage broker or new car. You can also mitigate the impacts of numerous hard pulls by ensuring they all fall within the same calendar month. This strategy indicates that you’re rate shopping, not looking for multiple loans.
It’s vital to stay on top of your credit report and regularly check it for fraudulent items. If you notice an inquiry that you didn’t authorize impacting your credit score, report it immediately and have it removed. This vigilance will ensure you get the financing approval you need and the best possible rates.