Types of inquiries
There are two types of inquiries that report to the credit bureaus.
#1 SOFT INQUIRIES: These are times when creditors have checked your credit without your authorization. A common example are all those “pre-approved” offers that come in the mail. Soft inquires do appear on your credit file with the bureaus because the bureaus want to keep a record of all the activity regarding your credit file and that includes every entity that’s requested your credit information. Soft inquiries will show up to you (as the consumer) if you purchase your credit file through the bureaus or through credit monitoring or when you obtain your one free report a year. Lenders, however, do not see soft inquiries when they pull you credit. They are simply omitted from the report lenders see when they pull your credit. Soft inquiries do NOT factor into your credit scores.
#2 HARD INQUIRIES: These are a list of all the entities that were supposedly authorized by you (the consumer) to check your credit file typically for potential lending. (These days jobs and rentals sometimes check credit as well, but are not potential lenders.) Hard inquiries (as well as soft inquiries) report for a maximum of two years and then fall off the credit files. The more recent the inquiry date the more it typically affects your credit scores. Many lenders will focus on inquiries in the last 60-90 days only, but they typically affect your scores until they are a year old. When they are older than one year they still report a bit longer, but typically do not make an impact in your scores.
Hard inquiries won’t usually affect your scores if there is one every few months or less. If there are multiple inquiries in a short time though you will notice a drop in your scores. Some loans (especially in the auto industry) will shop around for the best interest rates for you. That is good financially, but bad for your credit. This can often add 10 to 15 hard inquiries in a short time to your credit files. Technically, this type of shopping around is supposed to factor into your scores as one credit check, but more often than not these days they end up factoring in as separate inquiries.
Especially when they are very recent, a potential lender looking at your credit doesn’t know if you financed a vehicle if you financed 10 of them! When the loans are very new they don’t always report yet. Potential lenders must consider this when deciding if they want to offer you their money/goods to borrow and pay back. They will look at the most recent inquiries and assume you may have all those additional accounts that you are already indebted to, but that the accounts simply are not reporting yet. Also, numerous inquiries in a short time might indicate an individual who is desperate for lending and not managing without it. That also makes potential lenders nervous about loaning out their goods/money.
Disputing Inquiries
The Credit Guru always disputes all reported hard inquiries with Equifax. We do so because Equifax will investigate each disputed inquiry in the same manner that they investigate disputed accounts. They send an electronic request to each source and the source can either verify the inquiry was authorized by you, state that it wasn’t authorized and can be removed, or not respond. Like with accounts, if the creditor (in this case the inquiry source) does not respond to Equifax within 15 business days then Equifax removes the inquiry from the credit file. Sadly, we have seen a trend that inquiries are verified more often these day than they were in the past, but we do still see these removed prior to the two year “fall off” date frequently enough that it is worth trying. The less inquiries on the file the better for your scores… especially the more recent inquiries.
As for Transunion and Experian, these bureaus refuse to investigate credit inquiries in the same manner that they investigate account information. There is apparently a loophole in the laws that the bureaus are required to investigate accounts but not inquiries. They will remove the inquiries only if the source requests them to do so (or when they fall off after two years). This request from the source can be in the form of an electronic request or a letter on company letterhead from the source of the inquiry stating that the credit check was not authorized by you. We have attempted to disputes these with Experian and Transunion before and they will either ignore the request or mail a letter back stating that they will not investigate inquiries. Our main concern is that such a letter regarding inquiries might give the bureaus cause to avoid investigating at all (including the derogatory accounts which are being disputed and which technically they are required to investigate). The bureaus are easily confused and we do not want to risk delays deleting or correcting negative accounts simply for an attempt at lessening inquiries. The accounts play a much larger role in the credit scores than the credit inquiries do. If requested to do so by our clients… after they fully understand the risks to doing so… we will include the hard inquiries in the disputes to Experian and Transunion. Again, we already do dispute these with Equifax.