Applying for credit is not necessarily a bad thing because opening credit accounts is the best way to build your history. However, credit inquiries can have a negative impact on your credit score if you apply for too many accounts too quickly. Consider a few important tips about credit inquiries and how to manage this process responsibly.
What is the Difference Between Hard and Soft Inquiries?
A hard credit inquiry is a credit check associated with a credit application. This inquiry is generally correlated to a request for a new loan, line of credit or credit card. Hence, it is not something to be taken lightly as it is one of the many probable reasons for loan denial.
A soft inquiry, on the other hand, is a credit check unrelated to a request for credit and thus has less impact on your credit score than a hard inquiry. This might include purchasing auto insurance, opening a new utility account or random checks by existing credit accounts to determine new product marketing. Checking your own credit may also result in a soft inquiry.
Are Credit Inquiries Bad?
Credit inquiries in small amounts are not bad. However, if you continuously apply for lines of credit – whether you are approved or not – and multiple inquiries show up on your credit report, this can cause a negative impact. Creditors do not typically like to see rapid requests for credit as it indicates financial desperation or distress. It is best to refrain from applying for any new credit accounts six months before a major purchase, such as purchasing a home or vehicle. This will effectively allow your score to rebound from any inquiries made in the months prior. However, you could use the no traditional credit check loans during any financial emergencies and get the money you need.
How Can I Remove a Credit Inquiry?
Unless there is a reason to dispute the inclusion, there is no way to remove a credit inquiry. You have to wait for the predetermined period before it is removed from your credit report. If the inquiry is erroneous, you can reach out to the creditor to find out what happened and then dispute it with the major reporting agencies.
How Long Does It Take for an Inquiry to Fall Off My Report?
Hard inquiries remain on your credit report for up to two years. But credit scoring models do not count hard inquiries against your credit after 12 months. Because of the length of time inquiries can remain on your report, it is best to ask what kind of inquiry will happen before submitting a credit application.
How Do I Protect My Credit from Inquiries?
One of the best ways to protect your credit from multiple inquiries is to refrain from making them. Anytime that you sign up for a new account or apply for a financial product, read the fine print. Ask if the company is planning to check your credit and what kind of inquiry it will be. Sign up for one account at a time to avoid piling up the inquiries while you await a response.
Learn more about managing credit inquiries and how to avoid negatively impacting your credit with too many inquiries by educating yourself on good credit habits.
