Many factors go into how our credit scores are calculated, and there is indeed a formula. That formula can look like voodoo to a lot of people, and that’s where I come in. I’ve been writing and advising people for years on how to navigate credit reports and scores, and here I’ll dispel the mystery around one of the biggest questions: inquiries.
What Are Inquiries?
According to the government watchdog Consumer Financial Protection Bureau, an inquiry can be broken up into two groups:
Both of these originate from anyone wanting to take a peek at your credit report, even you.
A soft inquiry is typically someone, like yourself, who already has access or partial access to your credit report. This could include a credit card company with whom you already have an account, or the lender you borrowed from for your home or car.
There are other ways a soft inquiry arises, usually if you’re asked “prescreening” questions from a bank or car loan company.
A hard inquiry is different. These originate after you’ve applied for new credit. That means every time you apply for a new credit card, car loan, or mortgage, it will result in a hard inquiry.
How Much Do Inquiries Affect Credit Scores?
The good news is that soft inquiries don’t show up on our credit scores, at all. Hard inquiries, however, will stay on our credit reports for two years.
One upside to this, though, is that in the FICO reporting model (which over 90% of credit bureaus use), a hard inquiry is only calculated into your score for 12 months. (This means it is on your report, but is not affecting your score.)
But how much are these inquiries really counting toward your score? Not much, as it turns out. According to MyFICO.com, hard inquiries are under the umbrella of “new credit,” and is weighted at only 10% of your total score.
What You Can Do About Inquiries
If an inquiry is on your credit report, there isn’t much you can do about them. You can dispute them, but if it was a hard inquiry that you were notified would take place, and you proceeded with the loan application or credit check, then the inquiry will very likely stand.
If It’s Not Legit…
Then you need an ally. I recommend using a credit repair company to dispute any and all unlawful or unwarranted inquiries on your credit report. Not only can a good repair company dispute illegitimate inquiries, but they may even have some luck removing other inquiries. That’s because a good repair company can flood the system with disputes, and sometimes it’s not worth a creditors time to fight the paperwork.
You can dispute items on your credit score on your own, but be ready for a fight. It will require a lot of time and paperwork, and you’ll need to be diligent. That’s why I so often suggest hiring a professional.