Monitoring your credit report is the best way to keep in touch with your credit score and stay ahead of any nasty surprises. Financial literacy plays a vital role in developing a healthy relationship with money and understanding what impacts a credit score is a part of that.
Even so, there seems to be some confusion about inquiries. Here's what you need to know about this financial factor and how to remove them from your credit report.
How Do Inquiries Impact Your Credit Score?
It's important to note that while hard inquiries impact your score, they aren't a top priority when repairing your credit. In other words, they aren't as heavily weighted as something like a defaulting on a loan or being sent to collections. Even so, it's worth understanding the impacts of hard inquiry when trying to boost your credit score.
As mentioned before, hard inquiries occur when you request approval for a loan. When someone makes a hard inquiry on your behalf, it will remain on your credit score for two years. This is significantly less than other negative items on your credit score, which can last anywhere from seven to ten years.
The impact of a hard inquiry doesn't mean that you should limit your comparison shopping to find the best deal— it means that you need to research your options before allowing multiple brokers or dealerships to do a hard pull. It's also important to understand rate shopping, in which a financial service provider might shop around on your behalf. When one of these agencies conducts rate shopping, it will only show up as one hard pull.
Legitimate vs. Fraudulent Inquiries
If you've authorized a hard pull within the last two years, you cannot have the negative item removed from your report— this is a legitimate summary of your credit history.
However, if you don't recognize the request, it could indicate a fraudulent inquiry. A fraudulent inquiry could indicate that an agency pulled your credit score without consent or that you're a victim of identity theft. If you're unsure about an item on your credit report, it's always worth digging deeper.
Disputing and Removing Inquiries From Your Report
To remove inquiries from your credit report, you need to discover the errors and file a dispute. The first step is to request data validation from the creditor by sending a letter via traditional mail. You may have unknowingly approved a hard inquiry with a creditor, which is why it's integral to read the fine print of everything you sign. Sometimes the name of a creditor doesn't match the agency you worked with, as they may use a third party.
In addition to sending a request to the creditor for data validation, you can also send a notification to the three credit bureaus: TransUnion, Experian, and Equifax. It's worth using registered mail to get a delivery receipt for your paper trail. You should include a copy of the negative item as well as your personal information with the letter so they can cross-reference and determine the accuracy.
The bureau or creditor has 30 days to investigate upon receipt of the letter. They are obligated to respond to you within five days after completing the investigation and tell you whether the claim is valid or not. They are also obligated to tell you whether the dispute is lacking supporting evidence, so you can respond accordingly with more data.
Depending on the situation, it could take months for a resolved item to be removed from your credit report. If it's not corrected within 90 days after you've received confirmation, follow up with the bureaus.
Should You Use a Credit Freeze?
There's a common misconception that a credit freeze will help someone maintain their score indefinitely. While this strategy can prevent future inquiries, it also means that you won't be able to secure a loan until you lift the freeze.
A credit freeze is a valid idea if you uncover identity theft on your credit report. It will stop someone from taking out loans in your name. However, it won't prevent a stolen credit card or social security number. If you determine that the hard inquiries on your report, it's worth requesting a credit freeze until the issue is resolved. For a proactive approach, consider a fraud alert instead.
It's vital to stay ahead of your credit score and understand what's happening on your credit report. Consider your options before requesting a hard inquiry to prevent this minor negative item from showing up on your report.