How Long Do Hard Inquiries Stay on Your Credit Report?
The three major credit bureaus, Equifax, Experian, and TransUnion, must record hard credit inquiries or “hard pulls” on consumer credit files for two years. A credit reporting company must maintain the inquiry (entry) as part of the credit history unless it was fraudulently conducted.
Although the credit reporting agency is obligated to document hard credit account inquiries for 24 months on your credit bureau report, both the Fair Isaac Corporation (FICO) and VantageScore credit score models only factor in hard inquiries from the previous 12 months.
Per FICO, lenders and creditors view hard inquiries as a sign of risk, but to a lesser extent than a missed payment, late payment, etc. Data shows that consumers with six or more inquiries on their credit bureau report are several times more likely to file bankruptcy.
Difference Between a Soft and Hard Inquiry
The Consumer Financial Protection Bureau updated the Fair Credit Reporting Act by purposely allowing for credit report inquiries to investigate and evaluate a consumer’s creditworthiness, standing, and character in a way that is equitable, impartial, and protects privacy rights.
A hard credit report inquiry occurs when a prospective lender reviews a consumer’s credit report specifically for completing decisions related to issuing credit. For example, Capital One requests the Equifax credit report after a consumer applies for one of their best credit cards.
A hard credit inquiry generally results in a slight, temporary drop in your credit score regardless of whether the loan or financing was approved or not. Recent hard inquiries suggest to a prospective lender that a consumer might have unexpectedly encountered financial problems.
Credit Karma states that the most common activities that trigger a hard credit inquiry include applications for new credit card debt or installment loans including mortgages, personal, or student loans.
A soft credit check or inquiry is an action performed by either a consumer or a company for reasons that are not directly related to lending decisions. Soft credit checks only appear on consumer disclosures, which are personally requested credit inquiries.
Soft credit checks have no impact on your credit score. The most common examples include:
- Checking your personal credit report.
- Checking performed as part of pre-employment background screening for potential new hires.
- Those performed by credit card companies for purposes of marketing their pre-approval offers.
- Some checks are performed by those a consumer has an existing relationship with such as credit card companies making decisions regarding adjustments to credit limits, interest rates, etc.
- Checks made by car insurance and other property insurers on applicants when calculating their rates and premiums.
Some consumers worry that checking their credit has an adverse effect on their credit score; however, this is false, and checking your report annually to detect any errors in the account information and payment history is encouraged.
What about when you ask a credit card company or another lender for a credit limit increase on a current account? Experian says it depends on the credit card issuer or lender, as some creditors perform a hard credit inquiry.
Creditors see the same credit report information when performing either a soft or hard check. For example, adverse or bad credit entries include late credit card payments, collection agency debt, unpaid student loan debt, etc.
In 2020, Equifax began categorizing inquiries made by most phone, internet, and television providers as soft inquiries rather than hard inquiries.
By How Much Can a Hard Inquiry Impact Your Credit Score?
FICO characterizes credit inquiries as having a “small” impact on FICO scores, with each inquiry often resulting in a decline of fewer than 5 points. Further, FICO acknowledged that consumers with a shorter credit history and fewer accounts are most susceptible to a drop.
VantageScore describes a hard credit inquiry as a “breadcrumb” that can help consumers detect potential acts of identity theft or other forms of fraud. Yet lenders view inquiries as efforts to accrue more debt that translates to a greater risk of being unable to pay all expenses.
In terms of influencing your credit score, VantageScore states that hard inquiries are among the “least” influential factors and that a 5 to 15 point drop is common, but any change in score is more dependent on other aspects of a consumer’s overall credit profile.
Keep in mind that FICO and VantageScore’s models for calculation continue to evolve and they maintain specialized sub-versions used by different types of lenders, meaning that the scores often vary slightly.
Experian also recognizes how hard inquiries can cause a several-point drop in a FICO score. They detailed how the influence of inquiries declines over time and those scores typically “recover” over multiple months.
Credit Sesame concurred that a hard inquiry can trigger up to a five-point drop in your FICO score; however, the same hard inquiry could result in a more substantial VantageScore reduction of up to 20 points.
It is worthwhile to differentiate that hard credit inquiries generally have a less significant negative impact on your credit score than formally opening several new credit accounts.
How to Lower the Impact of Hard Inquiries
SInce a hard inquiry is likely to have a detrimental impact on your credit score; therefore, a good rule of thumb is to avoid applying for credit accounts that you do not need.
It is particularly important to recognize that this adverse effect could be compounded when multiple hard inquiries appear on your credit report in a short period of time.
FICO and VantageScore developers understand that the lending market is a competitive environment and consumers now are usually encouraged to “shop around” among potential lenders in search of more favorable interest rates, lower fees, etc.
Fortunately, credit scoring models will usually merge or consolidate multiple related credit inquiries into a single inquiry, with the exception of multiple credit lines (i.e. credit cards).
For example, auto dealers today develop relationships with various lenders and the finance department often acquires rates from several on your behalf.
According to VantageScore, all related inquiries occurring within 14 days are combined into one and only one entry appears on your credit report. Meanwhile, FICO’s previous models also used a 14-day timeframe, but have since extended this to a 45-day period for their newer models.
Consumers should keep this in mind while shopping and strive to conduct all comparisons involving car loans, mortgages, or student loans within 14 days. Remember that this fusion of hard inquiries is typically not applicable to credit cards.
One possible option for minimizing the impact of hard inquiries is to consider lenders that offer “pre-approval” offers. For example, Capital One has developed a pre-approval tool for many credit cards that generates only a soft credit inquiry.
The possible drawback to most pre-approval offers is that the lender will typically still need to perform a formal hard inquiry before finalizing the application process.
Another excellent option involves taking action to proactively improve your credit score before pursuing financing options. Here, you can boost your credit score to minimize the impact of any hard inquiries, late payments, etc.
Consider a credit builder loan from Credit Strong, which is a division of a leading community bank based in Austin, Texas. A credit builder loan is a form of installment loan that places the borrower’s loan funds in a secured savings account for the term of the loan.
Each month, the borrower makes a fixed, affordable monthly payment toward the loan balance, which is regularly reported to the three major credit bureaus and can progressively improve your score.
After all of the loan payments have been paid, the funds of the secured account are made available.
Can You Dispute Unauthorized Hard Inquiries?
Consumers are eligible to receive a free copy of their credit report from the major credit bureaus each year. Checking your credit report is a good practice that often reveals errors or mistakes, some of which may be hindering your credit score.
What if you notice a hard credit inquiry on your credit report that you do not recognize? Before conducting a hard credit inquiry, all parties must have permission according to the conditions that are outlined in the Fair Credit Reporting Act.
If a party accessed your credit report without authorization, the act might be considered fraudulent and allow for the removal of the inquiry.
In some cases, consumers will have uncertainty regarding the source of the inquiry, which doesn’t necessarily mean that it was fraudulent.
For example, some of the retail store brand credit card programs are operated by a third-party bank or financial institution; therefore, the inquiry may appear unfamiliar to you.
TransUnion created a checklist of best practices for consumers who suspect that an unauthorized credit inquiry occurred as follows:
- Use the contact information noted on the report to request whether the inquiry is related to an existing account or application that you initiated.
- If no evidence of an existing account or formal application exists, ask the institution to notify the three reporting agencies in writing to request the removal.
- If it appears that the inquiry involves attempted identity theft or other fraud, promptly notify the Federal Trade Commission (FTC).
- Consider making a fraud alert, which requires no fee and has no adverse impact on your credit score.
- You may also consider implementing a “credit freeze” program or monitoring program moving forward.
Hard credit inquiries appear on your credit report for two years but are usually only factored into your credit score for approximately one year. As consumers establish and build credit, hard credit inquiries are an inevitable reality, as lenders must be diligent.
Some of the best practices for limiting the negative effect of inquiries include avoiding applying for unneeded credit accounts, shopping around for rates from multiple lenders in a two-week period or less, and taking action to build your credit score.
Credit inquiries represent a relatively small factor among the many that influence your credit score — typically no more than 10%. Of much greater importance is establishing a multi-year credit history, avoiding any late payments, regularly checking your credit report, and others.
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