What Are Soft And Hard Credit Inquiries?

Good morning!

At least once a year, you should get a copy of your credit report to make sure all the information on there is accurate.

One category of items you want to check is called inquiries.

A credit inquiry is when an outside party – like a prospective employer, credit card company, or some other entity – runs your credit.

It’s important to know the difference between hard and soft credit inquiries, so as to not do anything that will damage your credit score.

Soft inquiries are pulled for the purposes of gathering information, and not to qualify for a loan.  If you apply for a job, for instance, and they pull your credit, that is considered a soft inquiry.  Soft inquiries will not affect your score.

I use Credit Karma, which updates me on my score monthly.  That’s also a soft inquiry.

A hard inquiry occurs anytime your credit is pulled for the purpose of borrowing money.  This includes applying for credit cards, auto loans, mortgages, and credit checks done by a prospective bank lender.

Each hard inquiry can lower your score by five points.  However, the credit bureaus assume that you are going to shop around for the best deal when looking for credit, so they allow you to pull your credit multiple times over a 30-day window and will only count those inquiries as one.

You should keep hard credit inquiries to no more than a few every three years.  Think about it: three inquiries in a year could cause your score to drop 15 points.  That can make a huge difference in your credit rating.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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Wealthy Joe Basics: How To Repair Your Credit!

credit repair

Checking your credit nowadays is so much easier than it was 20 to 30 years ago.

Resources like Credit Karma keep you up to date with any changes to your credit score.  They will also let you know if your data has been compromised.

Many credit card and bank apps now have a feature that allows you to check your score for free.

There really is no excuse in this day and age not to be on top of your credit!

When I was a freshman in college, over 25 years ago, the credit card companies would set up tables on campus.  In my opinion, that’s the original form of predatory lending: trying to get a bunch of 19 and 20 year olds to start the journey of credit ruin.

Unfortunately, at one point or another, many people will find themselves in a position of having mismanaged their debt.  Whether it’s due to not paying on time, or to a sudden loss of income, accounts in collection and charge-offs will destroy your credit score.

No matter how damaged your credit is, however, you can rebuild it.

I’m not a fan of credit repair companies, because sometimes they try to implement a quick fix that will boost your score but only last temporarily.

The truth is that rebuilding your credit score is very simple.  Here’s how it’s done:

Accounts in collection: Negotiate with the collection agencies to pay off the debt.  If you owe $2000, and you happen to have $1000 available, you could probably settle the debt with $1000.  Once it’s reported to the credit bureaus that the account has been paid, your credit score will increase.

After a bankruptcy or repossession: These kill your credit score.  Once they’re on your report it will take seven to ten years for them to come off.  The only thing you can do in this case is to continue to pay your other lines of credit on time.  Over time, your score will gradually improve.

Accounts that don’t belong to you: If you find an account on your credit report that you never opened, and are positive it doesn’t belong to you, you should write a dispute letter to each credit bureau (Equifax, Experian, and TransUnion) reporting this information and informing them that the account does not belong to you.

They have 30 days to either a) provide you with proof that the account is in fact yours or b) remove it from your credit report.

Identity theft in the information age is rampant, and something we all have to be on the lookout for.  You should make a habit of checking your credit quarterly.  The sooner you identify false information, the faster you can deal with the problem.  It can take over a year to clear up your credit due to being a victim of identity theft.

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)