When dealing with your credit score, it can be challenging to grasp that your score is always changing due to fluctuations in payments, accounts, credit applications, mortgages, and more. The three credit reporting agencies, Equifax, Experian, and TransUnion, keep track of your payment history and all other aspects of your credit and award a three-digit number that reflects your likelihood to pay back loans regularly. In general, this number is a fair representation of your credit. Yet, sometimes your score will start behaving oddly, dropping points out of nowhere, and causing you to worry about the state of your credit.
In this article, we at Quality Credit Repair, one of Philadelphia’s trusted debt counseling agencies, will discuss a specific issue many people have that can negatively affect credit scores: credit report inquiries.
When you look at that number through your bank, credit union, or an authorized entity (e.g., CreditKarma), you may notice that your score remains the same, no matter how many times you look at it. This situation is an example of a soft inquiry.
Soft inquiries, or pulls, are credit checks that happen when you or someone you authorize checks your credit report. However, many soft inquiries occur without your knowledge, including employers checking how you handle your finances before offering a job and creditors reviewing your account to see how you manage other credit obligations. These inquiries provide the viewer with information regarding your payment history, credit history, derogatory marks, and debt management.
Soft inquiries are the most frequent type of credit pull and do not affect your credit score. However, if you are applying for credit or a loan, you may notice your score drops three to ten points. Why does this happen?
Hard inquiries are quite possibly one of the most despised and unclear aspects of a credit report. A hard inquiry is a credit pull that shows creditors that you applied elsewhere for credit or a loan. These stretches usually incur a credit score deduction of five to ten points, which indicates that you are shopping around for additional credit. Since requiring more credit can be seen as a mark against your current credit and repayment habits, the hard inquiries make a small dent in your credit score to indicate that action.
Most of the time, especially if you have Good and Excellent credit, these pulls only take a few points off the top, barely scratching the surface. On the other hand, if you have Fair credit and are applying for credit multiple times a year, those five to ten points start adding up. These numerous inquiries can potentially reduce your score from Fair to Poor in a short amount of time, depending on the frequency and number of unique companies to which you are applying. Interestingly, if you manage to receive a bunch of hard inquiries from the same auto or mortgage lender over a brief period, the inquiries will not have as much of an effect on your overall score.
All inquiries, hard and soft, are noted on your credit report. But, hard inquiries can remain on your credit report for up to two years, although, many times, a full score recovery can occur before the inquiry is lifted.
If you are having issues with your credit score and need assistance getting to a better place on your report, call Quality Credit Repair today. We provide our clients with credit advice, bankruptcy debt counseling, hard inquiry disputes, and so much more!