If you’re looking to improve your credit score, one of the first things you can do is remove any negative inquiries from your report. Here’s how to do it quickly and effectively.
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The Basics of Inquiries
An inquiry is when a lender checks your credit report before approving you for a loan or credit card. Inquiries can stay on your credit report for up to two years and can lead to a small decrease in your credit score. If you have a lot of inquiries on your credit report, it can signify to lenders that you’re desperate for credit and may be a higher risk. This is why it’s important to remove inquiries from your credit report.
What is an Inquiry?
An inquiry is a notice that shows up on your credit report when you apply for new credit. It’s generated when a lender or creditor checks your report as part of their process for approving you for new accounts or loans.
Inquiries stay on your report for up to two years, but they have the most impact in the first year. That’s because lenders see multiple inquiries in a short period of time as a sign of risk. So, if you’re shopping around for the best loan terms, it’s best to do it within a 14-day window. This is called rate shopping and it’s allowed under the Fair Credit Reporting Act.
Inquiries can be divided into two categories: hard inquiries and soft inquiries. Hard inquiries are generated when you apply for new credit and can negatively impact yourcredit scores. Soft inquiries are generated when companies check your credit report for other reasons, like when you’re applying for a job or insurance, and they don’t affect your scores
Types of Inquiries
There are two types of inquiries that can appear on your credit report:
Hard Inquiries: Hard inquiries can stay on your credit report for up to 2 years, but their impact on your credit score will lessen over time. A hard inquiry happens when you give a lender permission to check your credit as part of their application process – like when you apply for a new credit card, a mortgage, or a car loan.
Soft Inquiries: Soft inquiries appear when someone checks your credit as part of a background check – like if an employer is considering hiring you, or if you’re considering renting an apartment. Soft inquiries don’t have any impact on your credit score, and they generally won’t be visible to anyone but you.
Inquiries can be helpful in some situations – like if you’re shopping around for the best interest rate on a loan. But too many inquiries in a short period of time can look bad to lenders, and can even lead to lower credit scores.
How Inquiries Affect Your Credit Score
An inquiry is when a company checks your credit report when you apply for credit. Inquiries can stay on your credit report for up to two years and can slightly hurt your credit score.While having inquiries on your credit report won’t have a major effect on your credit score, it’s still a good idea to remove them if possible.
The FICO Score
FICO® Scores are the credit scores most lenders use to determine your credit risk. You have three FICO® Scores, one for each of the three credit bureaus – Experian, TransUnion and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your FICO® Score may also change.
For many people, having a good FICO® Score is important to their financial well-being. A good score can lead to lower interest rates on loans and credit cards, higher approval odds for apartment rentals and jobs, and lower insurance premiums.
A bad score can mean higher interest rates and account fees, denial of loans and rental applications, and being turned down for a job. In short, a bad FICO® Score can cost you money and opportunities.
The VantageScore is a credit scoring model created by the three major credit bureaus: Experian, Equifax, and TransUnion. It’s one of the most commonly used credit scores (along with the FICO score), and it ranges from 300 to 850.
Your VantageScore is based on five key factors:
-Payment history (35%)
-Credit utilization (30%)
-Length of credit history (15%)
-Credit mix (10%)
-New credit (10%)
Inquiries are considered to be a small part of your payment history, accounting for only about 10% of your score. So, one or two inquiries shouldn’t have a major impact on your score. However, if you have a lot of inquiries – especially if they’re recent – it could signal to lenders that you’re desperate for credit or that you’re taking on too much new debt. Either way, it could lead to a higher interest rate or even denial of your loan or credit card application.
How to Remove Inquiries from Your Credit Report
If you have inquiries on your credit report, it’s important to know how to remove them. Inquiries can stay on your report for up to two years and can negatively impact your credit score. There are a few ways to remove inquiries, and the method you choose will depend on the type of inquiry. Here’s a look at the different types of inquiries and how to remove them.
The Dispute Process
The first step is to identify the inquiries you want to dispute. Next, gather any documentation you have that supports your case—for example, if you applied for a mortgage but were denied, you might have a letter from the lender explaining why. Once you have this documentation, reach out to the credit reporting agency and submit your dispute by mail, fax, or online. The credit reporting agency will then investigate your claim and remove any inaccurate or fraudulent inquiries from your report.
Sending a Goodwill Letter
A goodwill letter is a request to a lender to remove a negative entry from your credit report, usually because of extenuating circumstances or technical errors. For example, you might send a goodwill letter if you:
-Missed a payment due to an unforeseen circumstance, such as a natural disaster
-Were late on a payment but have since paid it off and made all your payments on time for six months
-Were late on a payment but the lender reports it as 60 days late instead of 30
When writing a goodwill letter, always be polite and honest. Explain what happened and why it won’t happen again. It’s also important to include supporting documentation, such as proof of on-time payments or evidence that the negative entry was reported in error.
Sending a goodwill letter is no guarantee that the negative entry will be removed from your credit report, but it’s worth a try — especially if you have otherwise strong credit.