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