When you apply for a loan or otherwise access your credit, the inquiring institution or business will often perform a credit inquiry to obtain your credit score and obtain your credit history for review. It is important to understand that there are two types of credit inquiries – hard inquiries and soft inquiries. We’ve outlined the general differences below –
Soft inquiries are those that are not performed by a potential lender. Examples – (a) Self-initiated check inquiry; (b) Employer background check; (c) Pre-Approval check for credit card offers; and (d) existing lender checking for credit line adjustment. These do not require your permission, nor do they affect your credit score.
Hard inquiries are those performed by a financial institution, such as a lender or credit card issuer, to check your credit when making a lending decision. Examples – (a) Auto loans; (b) personal or student loans; (c) mortgage loans; and (d) new credit cards. Hard inquiries require your permission (as you are applying for the credit/loan). They do affect your credit score (how much depends on numerous factors, but they lower your score to some degree). Hard inquiries stay on your credit report for two years; however, the impact on your credit score is often gone before the two years has passed.
We strongly recommend you check your credit score often. At the very least you can obtain your official credit reports from the big three credit agencies (Experian, Equifax, and TransUnion) every 12 months as allowed by law. (Additionally, two free resources we use and recommend to allow you perpetual access are www.creditkarma.com and www.creditsesame.com).
If hard inquiries are on your credit report you did not authorize, you have the right to demand the removal, and, if that is not done by the creditor, you can sue under the Fair Credit Reporting Act.
As always, if you have any questions regarding your credit score or your credit reports, please contact our experienced Virginia Beach attorneys today. We’d be happy to assist you.
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