In the world of personal finance, Credit reports play a significant role in determining an individual’s creditworthiness. These reports provide a comprehensive overview of an individual’s credit history, including borrowing and repayment patterns.
One crucial aspect of credit reports is hard Inquiries, which happen when a lender or financial institution requests access to an individual’s credit information to assess their creditworthiness. Hard inquiries stay on your Credit Report for two years and can impact your credit score during the first year.
How long does a hard inquiry last on your credit report?
A hard inquiry typically lasts on your credit report for about two years. These inquiries are recorded on your credit report and may have a temporary impact on your credit score. It’s essential to be mindful of the number of hard inquiries you generate within a short period, as multiple inquiries in a short time frame could negatively affect your credit score.
The impact of hard inquiries on your credit score lessens over time, and they eventually fall off your credit report after the two-year period.
What is the difference between hard and soft inquiries?
A soft credit inquiry, also known as a soft credit check, is usually performed when you’re checking your credit report, when a lender pre-approves you for a credit offer, or background checks by employers. A hard inquiry (also known as a hard pull) is often done from the lender’s side as part of your credit or loan application to check your reliability.
The main difference between the two is that a hard inquiry affects your credit score, whereas a soft pull does not.
Here are a few other differences:
Hard inquiry
- A hard inquiry comes up in your credit history when a lender views your credit report. It may be a review of your request for a mortgage or car loan, student loan, home loan, or any other line of credit.
- This requires your approval beforehand.
- Stays on your credit report for two years but usually has an impact on your credit score for up to a year.
Soft inquiry
- A soft credit inquiry is usually performed when you’re checking your credit report, when a lender pre-approves you for a credit offer, or background checks by employers.
- This may take place without your approval.
- Does not affect your credit rating and is visible only to you.
How soon do hard inquiries show up on credit reports?
Hard inquiries typically show up on your credit report shortly after they occur. In most cases, hard inquiries will appear on your credit report within a few days to a week after you apply for new credit.
The exact timing may vary depending on the credit bureau and the reporting practices of the lender or creditor who initiated the inquiry.
Types of activities that result in hard inquiries
Credit card applications
If you request a credit card, the potential lender will conduct a hard inquiry to check if you aren’t a risky borrower. If you apply for various credit card applications, the lender can deny the facility.
Loan applications (e.g., mortgage, auto loans)
If you apply for a mortgage, auto loan, home loan, personal loan or a certain type of student loan, a lender will make a hard inquiry.
Renting or leasing applications
In the case of renting and leasing a property, the lending decision depends on your credit history. That requires an investigation through a hard inquiry.
How to minimise the impact of hard inquiries on credit scores?
- Apply for credit selectively: Only apply for credit when you genuinely need it.
- Check pre-approval offers: Some lenders may send you pre-approval offers for credit cards or loans based on a soft inquiry.
- Consolidate applications: If you plan to apply for multiple types of credit (e.g., credit cards, mortgage, or auto loan), try to consolidate the applications within a short period to minimise the impact.
- Review your own credit report: Check your free credit report to ensure that all hard inquiries are accurate and authorised.
How to dispute inaccurate or unauthorised hard inquiries?
Disputing inaccurate or unauthorized hard inquiries on your credit report is an important step to ensure the accuracy of your credit information. If you find any hard inquiries that you believe are incorrect or unauthorised, follow these steps to dispute them:
- Request a free copy of your credit report from all three major credit bureaus – Equifax, Experian, and TransUnion. Free report is available only once a year.
- Carefully review each credit report to identify any hard inquiries that you believe are inaccurate or unauthorised. Hard inquiries should be listed in a section that shows recent credit inquiries.
- Gather evidence or documentation that supports your claim of inaccuracy or unauthorized inquiries. This could include proof of identity, such as your ID or driver’s license, and any documentation that shows you did not apply for credit with the company associated with the inquiry.
- Contact the credit bureau that is reporting the inaccurate or unauthorized inquiry. You can do this online, by mail, or by phone.
- Keep track of your dispute and follow up with the credit bureau and creditor if necessary. Credit bureaus are required to investigate disputes within a reasonable time frame, typically within 30 days.
- Once the investigation is complete, check your credit report again to ensure that the inaccurate or unauthorised inquiry has been removed.
Conclusion
If a hard pull is unavoidable, remember that it will only stay on your credit report for two years. If your credit history has been up to par, a hard inquiry won’t hurt your credit score too much. Fulfilling other prerequisites, as mentioned above, can also help elevate your credit score.
Repaying your loans on time, keeping a low credit utilisation ratio, and being thoughtful of your spending can help maintain your credit score in a good range.
FAQs
Do multiple hard inquiries count as one?
Yes, multiple hard inquiries for the same type of credit within a specific time frame often count as one inquiry.
Should I worry about hard inquiries?
Worrying about hard inquiries is not necessary, but being mindful of them is important for maintaining a healthy credit profile.
What is a good credit score?
The good credit score range varies from one CRA to another: For Equifax, it lies between 531-670; for Experian, it’s 881-960. And for TransUnion, 604-627 is considered a good credit score.
How do I rebuild my credit after a hard inquiry?
Making your payments on time, keeping credit card balances close to negligible, using less than your credit limit, and thinking twice before opting for credit can help you rebuild your credit score fast.
How many credit inquiries are normal?
There is no set high number of credit inquiries. However, too many hard pulls in a short span can make a lender doubt you as a precarious borrower. Experts highly recommend not to exceed three hard credit inquiries within 45 days.
Disclaimer: The information given above is provided for reference only. This is not financial advice.
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What Is the Average Credit Score in the UK
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