Keeping Track of Your Credit Report Inquiries

/ BY / Credit 101

If you’re like most of us, you probably think that keeping an eye on your credit report primarily means watching out for charges that don’t belong to you. However, there are some things that go into your credit report you may not be aware of. Surprisingly, credit report inquiries can act like little dings on your report, adding up over time and lowering your credit score. Monitoring and controlling the number and type of inquiries helps keep your score high.

What are credit report inquiries?

Credit report inquiries are requests for information from your credit report. Anytime you apply for credit, whether it’s a mortgage or credit card, it’s recorded on your report as an inquiry. They are routinely used by department stores, credit card companies, banks, employers, landlords and others who are interested in how you handle your money.

What is the difference between soft and hard inquiries?

There are two types of credit report inquiries—soft inquiries and hard inquiries. Soft credit inquiries don’t affect your credit score, although they may show up on your report. They can be run without your permission and include:

  • Checks you run on your own credit report
  • Checks run by employers
  • Checks run by credit card companies and banks offering pre-approved loans or credit cards

Hard inquiries on the other hand do affect your credit score and require your permission. They are usually run by banks, credit card companies or other lenders who use the information to decide whether or not to lend you money.

How do inquiries affect your credit?

A hard inquiry can knock a few points off your score and stays on your report for about two years. Frequent hard inquiries are a concern to lenders because they may indicate difficulty qualifying for a loan. Credit reporting agencies also use the resulting dip in your score as a deterrent, hoping you will limit your debt load.

How can I keep track of my inquiries?

Inquiries can add up over time and affect your score if you’re not careful. These tips can help you keep track of them:

  • Don’t apply for credit too often. Financial advisors suggest that you keep hard inquires to one or two annually. Try developing a borrowing plan to determine when you will apply for an auto loan, credit cards, or mortgage.
  • Be careful who you allow to run your credit. Employers rarely need to pull a hard inquiry and should only do so if you will be handling money or secure information. Landlords can usually get by with information garnered from a soft inquiry.
  • When shopping for a mortgage or car loan, shop within a short amount of time. Creditors know that you will only be approved for one mortgage or auto loan, so several related inquiries within a short timespan don’t indicate increased risk for your lender.
  • Check your credit report often. You can check your own report as frequently as you like and because it is a soft inquiry, your score will not be affected.
  • Dispute any inquiries you didn’t authorize. Hard inquiries require your permission. If you discover a hard inquiry you did not authorize, open a dispute with each of the major credit reporting agencies.

A credit score that is just a few points too low can sometimes mean paying a higher interest rate. Keeping hard inquiries to a minimum is an easy way to keep the cost of borrowing low.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.