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If you recently applied for a new credit card or loan, you may have been surprised to see a slight dip in your credit scores afterwards. Credit scores change often, but applying for a new account can trigger a hard inquiry and could cause an unwanted change in your scores.
Hard inquiries happen when you apply for a new loan or credit card and the lender pulls your credit reports to determine if you qualify. In most cases, hard inquiries have very little if any impact on your credit scores—and they have no effect after one year from the date the inquiry was made. So when a hard inquiry is removed from your credit reports, your scores may not improve much—or see any movement at all.
How Long Do Hard Inquiries Stay on Your Credit?
Hard inquiries stay on your credit reports for two years, but they only affect your FICO® Scores☉ (the credit scores most widely used by lenders) for one year.
The impact of a single hard inquiry is relatively small, usually dinging your FICO® Score five points or less. You can gain those points back over just a few months' time, however, with positive credit habits such as paying down debt and making all your payments on time.
If you accrue several hard inquiries by applying for different types of credit (say, a credit card, personal loan and car loan) within a short period of time, however, your scores may experience a bigger drop. Multiple applications can also hurt your chances of getting a new loan, since they indicate to lenders that you're potentially taking on lots of new debt all at once. The exception is if you're rate-shopping for a mortgage or car loan and multiple lenders request your report within a short period of time: Although you will see each individual inquiry listed on your report, most credit scoring models will only count them as one.
Can You Remove Hard Inquiries From Your Credit Report?
If a hard inquiry is the result of a credit application you made, it cannot be removed from your credit report. It is simply a matter of record, and it will fall off your report naturally after two years—and will have no effect on your credit scores after one year.
However, if you discover a hard inquiry for a credit application you didn't submit, it may be a sign of attempted fraud. In this case you can file a dispute to have the inquiry removed. Filing a dispute is free and fairly easy, but it's only meant to help you remove incorrect information from your credit report. If the inquiry is determined to be the result of fraudulent activity, it will be removed.
If you find an unauthorized hard inquiry, be sure to review your reports for further signs of fraud, including unfamiliar accounts, and dispute them right away.
Does Your Credit Score Improve When a Hard Inquiry Is Removed?
If a hard inquiry has been on your credit report for less than a year, you could possibly gain a few points by having it removed if you disputed it due to fraud. The more recent the inquiry, the more points you stand to gain. Gaining just a few points might feel satisfying, but it isn't usually enough to make a difference in being approved or declined on future credit applications.
When a hard inquiry falls off your credit report naturally because it has reached the two-year mark, your credit score will likely not be affected at all since hard inquiries do not impact your scores after one year.
How to Minimize the Impact of Hard Inquiries on Your Credit
It's important to do some comparison shopping when you're looking for a new credit card or loan. You may not be able to avoid new hard inquiries on your credit report, but there are a few ways to reduce the impact of shopping around:
- Time your applications strategically. If you're shopping for a mortgage or an auto loan, make all of your applications within a 14-day window. If you stick within this timeframe, all of your applications will be calculated as just one hard inquiry.
- Apply selectively. Reduce the number of applications you submit by getting selective about where you apply. Compare rates and fees first, and see if the lender offers prequalification. Prequalification can allow you to get quotes on interest rates, fees and loan amounts without a hard inquiry.
- Practice good credit habits. Virtually all other credit activities have a bigger effect on your credit scores than hard inquiries. Even if you have to add multiple hard inquiries to your reports, you can keep your credit rating high by staying current on loan payments and keeping your credit card balances to a minimum.
Further Credit Review
It's a common myth that pulling your own credit reports causes a hard inquiry and hurts your credit scores. The truth is, pulling your reports is considered a soft inquiry and doesn't affect your scores at all. In fact, pulling your credit reports is a crucial part of building and maintaining great credit scores. You can check your credit report and FICO® Score for free through Experian.
When you regularly review your credit information, you can find areas for improvement and quickly address inaccuracies or signs of fraud. Monitoring your reports in this way can help you avoid unwanted surprises next time you apply for a credit card or loan.
