How long do hard inquiries stay on your credit report? A hard inquiry, also known as a hard pull, is a type of credit request that occurs when you apply for credit, such as a mortgage, car loan, credit card, etc. Lenders usually pull your credit report to view all account information, including the number of loans on your credit reports, your credit score, how much you owe, etc. This results in a hard inquiry on your credit reports, and they can lower your credit score by a few points.
Unlike other negative items on your credit reports, hard inquiries do not stay on your credit reports for long as they only stay on your report for 24 months. However, the effects of hard inquiries fade over time and will not affect your credit score after 12 months. Before a lender pulls your credit reports, you must permit them, as doing so lowers your credit score. If you see a hard inquiry you don’t recognize, contact your lender and dispute it immediately because it could indicate fraud or identity theft.
Here is everything you need to know about how long hard inquiries stay on your credit reports and tips to remove them from your report.
What is a hard inquiry?
Every time you apply for a loan, such as a car loan, a credit card, or a mortgage, the lender runs a hard pull on your credit report as part of the loan application process.
A hard inquiry will appear on your credit report whether you are accepted or denied. Your credit score goes lower by a few points because a hard inquiry shows that you are attempting to borrow money, which increases the risk of lending you money. For example, borrowing money can potentially increase the debt you owe and your DTI ratio. This, in turn, will lower your creditworthiness and make you a risky borrower.
The hard inquiry will stay on your report for two years. However, it will not affect your credit score after one year. With excellent credit activities, your credit score will increase again in a few months.
Lenders interpret hard inquiries differently depending on how long they have been on your report. If you recently got an inquiry, it could indicate that you are looking for a loan; therefore, a lender may see you as a potential borrower.
Lenders also run soft inquiries on your report, which are only visible to you and do not affect your credit score. This could be the reason you start receiving many pre-approval letters in your mail from different companies after applying for a loan.
Example of a hard inquiry
Let’s say Mike wants to buy a house but doesn’t have the cash to pay it off in full. So, he decides to visit a bank to see if he can get a mortgage. The bank must determine whether he is qualified for the money based on how he fits their loan terms and requirements.
Some of those requirements include but are not limited to having a good credit score, usually at least 620 for conventional mortgages, a lower DTI ratio, credit history, income, etc. Even if he doesn’t have other loans, the bank will need to know how he handles debt or loans in general.
The only way to figure this information out is to run a hard pull on his credit report.
The information from his report will help the lender evaluate Mike’s creditworthiness.
This credit request will show on Mike’s credit report as a hard inquiry, even if he did not qualify for the money.
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What is a soft inquiry?
A soft inquiry does not affect your credit score and is only viable to you. Soft inquiries occur when you check your credit report. It can also happen when companies view your report to see if they can pre-qualify you for a loan, mortgage, or credit card.
According to FICO, the following are some of the activities that will result in soft inquiries.
- Consumer disclosure. When you check your credit report
- Insurance inquiries. From insurance companies
- Employment Inquiries. When a potential employer wants to know if you are financially responsible before you get hired, for example.
- Account review inquiry. A lender who wants to review your existing accounts for potential pre-qualifications.
- Promotional inquiry. These happen when a lender wants to pre-approve you for a higher credit limit.
These soft inquiries happen daily, and you will never know about them. Of course, you can view them when you get a copy of your credit report, but they do not affect your credit score.
You can also tell if a soft inquiry was run on your credit report when you receive a letter in the mail telling you that you have been pre-approved for the loan, credit cards, mortgage, etc. If you see these letters, do not panic because soft inquiries will never affect your credit score.
Furthermore, soft inquiries are not bad on your report. Lenders will not see them when they pull your credit report. Soft inquiries only show on a report you requested, also known as a consumer disclosure, and you are the only one who can see them.
Do you get a hard inquiry every time you apply for credit?
Every time a lender pulls your credit report, you will have a hard inquiry. If the lender approves you for a loan without pulling your credit report, you will not get a hard inquiry on your credit report. In addition, each inquiry will affect your credit score, depending on the time frame between your inquiries.
According to Equifax, only one will affect your credit score if all your inquiries happen between 14-45 days. Keep in mind that all these inquiries will show on your credit report. This exception occurs when applying for a new loan or mortgage or looking for a new utility company.
Note that this period will differ depending on the credit model used in your credit reporting.
This exception does not apply to other forms of credit, such as credit cards. If you apply for multiple credit cards, each time you apply for a credit card, it will be recorded as a hard inquiry, and each of them will lower your credit score. For this reason, it is essential to apply for loans that you qualify for. You should also get prequalified first before you apply for loans.
How long do hard inquiries stay on your credit report?
Hard inquiries stay on your credit report for two years. The good news is that their effect on your credit score fades over time and will not affect your score after 12 months.
You should expect a hard inquiry when applying for a loan or a mortgage. Depending on the credit reporting model used to calculate your credit score, only one of these inquiries might affect your credit score as long as it falls within a particular time frame. This time frame will also differ from one reporting company to another, ranging between 14 and 45 days.
Do I get an inquiry when I am approved for a loan?
The simple answer is yes. The inquiries occur on your report whenever a lender requests to view your credit information as part of the loan application process.
This activity will show on your credit report as a hard inquiry regardless of whether your loan application is approved or denied.
How many points does your credit score drop from a hard inquiry?
When a hard inquiry is reported on your credit reports, your credit score drops by a few points. WalletHub says your credit score can drop 5-10 points from a hard inquiry.
When you apply for credit, lenders think your financial situation could worsen. This is because additional debt on your credit report does not look good from the lenders’ perspective. More debt means increased chances of defaulting on your loans. For this reason, your credit score will drop by a few points.
To avoid lowering your credit score for a long time, you should avoid having multiple hard inquiries during a wider time frame. In other words, you should try to get all hard inquiries as close as possible to avoid losing many points on your score.
This is an example of how hard inquiries will affect your credit score.
- You applied for a credit card today
- Two months later, you applied for a car loan
- Eight months later, you got a mortgage or a student loan
All these activities will be reported on your credit report, and each one of them will result in a hard inquiry. In addition, you will lose between 5-10 points from each hard inquiry.
For this reason, the total points you will lose from these inquiries will be between 15-30 points. This does not mean that if your credit score is 780, you will have a credit score between 750 and 765. This is because there is enough time between each inquiry, and therefore, there is a chance your score will rebound before the other inquiry kicks in.
For example, if you pay your bills on time and do not get involved in other activities that can jeopardize your score, you could build it back up in a few months. Therefore, your score could be higher before the effect of other hard inquiries.
Does your credit score go up when a hard inquiry drops off?
Your credit score will not increase when a hard inquiry is removed from your credit report. This is because it will not impact your credit score when it is removed naturally, which is 24 months.
When you have a hard inquiry, its impact on your credit score fades over time and stops affecting your score after 12 months. So, you can see there is still one more year before it drops off. If you use your credit responsibly, your score could bounce back in a few months. That is paying off your bills on time, having no missed payments, having reasonable credit utilization, etc.
Why do hard inquiries lower credit scores?
Applying for a loan or a mortgage is a sign that there is a big purchase that you cannot cover yourself without help. The idea that you seek credit to buy what you need indicates that your finances are not in good standing.
As a result, credit ratings see this as a negative thing. This is why they lower your credit score. You can consider a hard inquiry as a small warning you get when you apply for credit. As you apply for more credit, you get more hard inquiries depending on the time frame between your inquiries and the type of loans you are applying for.
In other words, credit rating companies keep lowering your credit score as you apply for more credit. They think you are becoming a more risky borrower the more you apply for more credit. This makes sense because the more debt you have, the harder it will be to pay it off.
More hard inquiries on your report can lead to a denial of a loan or mortgage in the future.
According to FICO, people with six or more hard inquiries on their credit reports are eight times more likely to declare bankruptcy than those who don’t. This statistic shows why credit rating agencies penalize you by reducing your credit score when you apply for credit.
A hard inquiry is one of many factors that affect your credit score. However, it is not the most critical factor. The following are other factors that can affect your credit score.
- Payment History
- Credit utilization
- Mixed accounts
- Credit age
Related article: Factors on which a credit score is based on
How do you remove hard inquiries from credit reports?
You cannot remove legitimate credit inquiries from your credit report. These inquiries will stay on your account for two years. When their time is over, they will be removed automatically. However, if you have a hard inquiry you do not recognize, you can dispute it to credit reporting agencies and/or the lender that reported it. Here is a guide on disputing errors, inaccuracies, and fraudulent activities from your credit reports.
How to reduce the impact of hard inquiries on a credit report
Even if there is not much you can do to eliminate a legitimate hard inquiry on your credit report, there are proper steps to minimize its impact on your report.
Get pre-qualified. Most lenders will qualify you for the loan beforehand, allowing you to apply for loans you can easily get approved for. For example, if you want a mortgage, have the required credit score, boost your income, and pay off some of your loans. Then, reach out to the lender and get pre-qualified.
Apply for multiple loans in a small time frame (this is subject to the kind of loan you want). Student loans, car loans, and mortgage inquiries triggered within 45 days may be considered a single inquiry when calculating your credit score, according to FICO. So, if you are hunting for a mortgage, a loan, or a student loan, take one month and apply for many loans. This way, you will have multiple inquiries, but only one will affect your score. Other types of loans, such as credit cards, do not come with this benefit.
Manage your credit effectively. Since applying for loans results in hard inquiries on your credit reports, manage your accounts effectively to avoid further lowering your credit score. Paying your bills on time and using your credit wisely are tips for managing your accounts effectively.
