One of the main purposes served by credit reports is telling creditors whether you are likely to repay a new loan or account. Lenders judge you by your past and present payment performance and current account balances, and they also consider the number of applications you filled out recently. All of these things factor into your credit report and your perceived creditworthiness.
Definition
Hard inquiries are one of two inquiry types you see when you order your TransUnion, Experian and Equifax credit reports. Lenders check your credit bureau records whenever you apply for a credit card, personal loan, auto financing or mortgage, and their inquiries become part of your file, too. While hard inquiries come from credit applications, the other type, called soft inquiries, results from companies pre-screening you for marketing and your own credit report checks.
Effects
Soft inquiries are invisible to lenders, but they see every hard inquiry made into your records for the past two years. Application-based inquiries also hurt your credit score to varying degrees. They only lower it by five points or less if you have a single inquiry over the past 12 months, according to the FICO scoring model, but the negative effect increases for additional credit checks. You look especially risky to creditors if you filled out more than five applications in a short time because your possibility of filing bankruptcy is statistically very high.
Assessment
Your TransUnion, Experian and Equifax credit reports are available for free every year if you wish to check the number of hard and soft queries showing up in your records. This, combined with other account information, lets you assess your credit rating and attractiveness to lenders. Use AnnualCreditReport.com for your report orders, the Federal Trade Commission advises, because it is the official website run by all three bureaus to handle the federally mandated no-cost report orders. You will see all your credit checks over the past two years, while lenders only see hard inquiries.
Considerations
You may find some unrecognized hard inquiries on your credit reports, and federal law allows you to request proof of your authorization for those credit credits, according to the Illinois Attorney General's Office. The companies listed as making those inquiries must erase them from your credit reports if they cannot comply with your validation request. Write letters to any unrecognized companies, using the contact information on your credit reports, and ask for a copy of your authorization or removal of the inquiry.
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