To remove a credit inquiry from your report it is necessary to meet certain requirements. If you have queries that can be deleted, it’s time to brush up on your writing skills, as you will have to write a letter.
Now, if you thought that bad credit is only caused by late payments, then think again, since there are several elements that contribute to the calculation of the credit score.
And why is that score important? Well, because lenders use it to determine if they grant you credit. In this sense, a credit inquiry can have a tiny effect on the total score compared to other factors, however, in certain cases it can be the difference between obtaining a good interest rate.
In this article, We are going to help you understand what a credit inquiry is, as well as its types. You’ll also learn what impact they have on your score, as well as other details. Shall we start?
What is a credit inquiry?
Have you ever applied for a loan? The following are some examples of activities that typically warrant a credit inquiry:
- Buy or rent a new car
- A new house
- rent an apartment
- Telephone services contract
- Store credit card
- personal loan
- buy insurance
- Apply for a job where a credit check is required
There are some activities you may be familiar with and some you may not, but they all result in a credit inquiry. The entity requesting the information on your behalf will normally provide you with the results, as required by law.
The results can be favorable or adverse. If they are adverse, the entity must notify the reason why they have denied the credit or why they have approved it with a higher finance charge (or a deposit if it is a rental).
Sometimes the creditor will require a consignee on the application. This means that you represent a higher credit risk and the company wants to ensure that you will receive payment for the merchandise or service.
The solution for you to get the best possible rate is to always check your credit report and keep it in shape. This includes monitoring the query section, which is at the bottom of the report.
Types of credit inquiry
There are two types of consultation: hard and soft. The difference between the two lies in who is requesting the information and the reason for the request.
A hard credit inquiry happens when you, the consumer, apply for a new line of credit. In this case, you have to give your consent for the creditor in question to see the information of your credit report. The lender will be able to see all the necessary details, such as credit scores and types, to make a decision on your application.
As for soft queries, these are made without your express consent. Insurance companies or credit card companies make these inquiries when they are pre-screening you for eligibility for their offers. These inquiries can also occur if you already have an open line of credit with a company, or in general if you are applying for a position where the salary is more than $70,000..
Is it possible to delete a credit inquiry?
Bottom line: Yes. However, hard queries are the only ones that can be removed, as they may present themselves as negative in the eyes of a creditor. In this sense, a method of elimination is the dispute by registered letter, which must be addressed to each of the credit bureaus.
The content of the letter should include the reason you are writing (in this case, to dispute a credit inquiry), the company that requested your information, the reason you are disputing (usually due to unrecognized activity or unauthorized), and your request to have the negative article removed.
You must also include your credit report. Highlight queries to better indicate which items you want investigated and/or removed. If there are multiple queries, it may be convenient to number or type them. That will make it better to refer to them in the letter.
In general, you don’t need to delete inquiries if you have good credit. However, if you have poor or marginal credit, you should probably seek elimination, since this could mean a difference of 5 to 10 points in financing at 10.99% or 15.99%, hypothetically.
Now, the alternative to writing a letter is to simply wait for the query(s) to go away on their own. In this case, we recommend that you avoid requesting a loan as long as the inquiries do not disappear. The only drawback is that it is not the fastest solution.
If all of this sounds a bit overwhelming, you might consider asking a professional to help you remove inquiries from your credit report.
Hard queries and credit requests
When you apply for new credit, you generally provide information such as your name, address, phone number, and social Security number, which are necessary to accurately identify the credit record.
As we have mentioned, your credit application will require your signature, giving the lender or a financial consultant permission to access your credit file.
You may be familiar with this approach if you’ve ever bought a car. If you walk into the dealership, they will ask you to fill out a credit application before letting you test drive the cars. You may be subject to multiple hard queries using this approach, as the dealer will search for the offer that best suits your situation.
After you purchase the car, you’ll discover several query entries on your credit report. But don’t panic, as different FICO scoring models use multiple applications for a loan type as a single application, indicating that the best rates were sought.
You’re probably wondering how long a credit inquiry stays on your report, well, you have to know that they affect your score for one year, and that they are erased after two.
Soft credit inquiry: How does it work?
The other type of credit inquiry is a little different and doesn’t affect your score at all, but what exactly is it? Simply put, a soft query is initiated by you, the report owner, although they can also be initiated by financial institutions.
As long as you have a credit card or a shop card, the respective companies will make soft inquiries to verify your credit situation. They do this for a variety of reasons, including to see if you’re eligible for an automatic credit limit increase.
Another reason a company would do a soft inquiry is to see if you are eligible for other products. For example, if you only have one credit card and the company or lender also offers auto and mortgage loans, then you may receive emails or direct mails saying you are eligible for their offers.
Pre-selection for marketing
This is a detail that you probably ignore, but companies are able to offer personalized offers thanks to soft queries of your report. According to the Federal Trade Commission, creditors or insurers will ask the credit bureaus for a list of people with a certain score to whom to target their marketing campaigns.
Although this may be a nuisance for some, it can be highly beneficial for others, as exclusive offers may only be available through pre-screening.
On the other hand, when you have multiple types of insurance, your provider may periodically revise your report to offer more products or lower your rates at renewal. Naturally, this also results in smooth querying of your report. Finally, only you can see the soft queries and their details, and they disappear from the report in a year.
How credit scores are affected by hard inquiries
When a hard credit inquiry takes place, your credit score will drop a few points, and this situation will last for about a year.
In this order of ideas, if you are actively looking for a car loan or a mortgage and you need the most favorable terms, we advise you to make all inquiries within a period of 30 days. Why? Well, because all credit inquiries made during this period will count as one, having a minimal impact on your score.
As we have mentioned, the reduction is minimal, from one to 5 points. However, continuing to pay on time and maintaining good financial habits will move a bad credit score into “good” territory over time.
Monitoring your credit utilization and refraining from getting new lines are other tactics to mitigate the effects of hard inquiries.
Truth be told, the point reduction caused by a hard query is small compared to the decrease caused by an increase in the credit card balance.
Unsolicited Credit Inquiries
A general rule of thumb when it comes to your credit report is to check that everything is correct and note any discrepancies. This includes inquiries, as creditors sometimes look at the number of inquiries in their decision to extend a new line. Having an excessive number of queries can also lower your score.
Due to the potential effects of credit inquiries, as well as any information on your report, you need to make sure everything is correct and accurate. You can start by verifying who initiated the hard queries, either through a signed request or an online form.
If you find a query from a company that you don’t recognize, you can choose to have the company remove the query. If you’re not sure if you should delete the inquiry or don’t understand how it affects your credit score, you can seek help from a credit repair company.
A credit repair company can advise you on how to deal with inquiries and other potentially negative items on your credit report. They can also give you advice on how to handle the matter yourself.
When it comes to credit inquiries, while they may be a small piece of the credit score pie, they can hurt you financially. After all, they are records that show your credit history, from which lenders can get an idea of your situation.
Inquiries give you an idea of how often someone reviews a report to offer you an attractive offer for a new line of credit. They can also show how often you apply for additional lines of credit. If you have multiple queries on your report, it can make you appear like a credit risk to potential creditors; and if you do not acknowledge or consent to any such inquiries, you should immediately contact the company and/or file a dispute.
In case you are not familiar with this process or you are not a great formal writer of letters, you can choose to hire the services of a credit repair agency, which will be able to help you with the elimination of inquiries, along with the elimination of others. negative elements that can affect your credit score.