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How Long Do Inquiries Stay On My Credit Report?

How Long Do Inquiries Stay On My Credit Report?

Credit reports have a section most consumers may not be familiar with and are curious about what it means in terms of their ability to obtain credit and how it may impact their FICO score. The inquiries area, while not as important as payment history or total credit lines, does reflect a pattern of consumer behavior which is relevant to current and future lenders when extending credit. The inquiries section is important to understand because of how long an inquiry stays on a credit report and how it can affect future financial plans either positively or negatively.

An inquiry on your credit report is a listing of current businesses or persons which have checked your credit report for one reason or another. There are two different types of inquiries, the first is called a hard inquiry and the second is a soft inquiry. The differentiation between the two is important because hard inquiries can infect your credit score while soft inquiries do not. A hard inquiry appears when a company views your credit report prior to extending credit, such as applying for a credit card or a mortgage. Soft inquiries occur when a consumer reviews their own credit report such as when they get a free annual credit report. Hard inquiries are viewable by any individual or company who has access to your credit report while soft inquiries are only viewable to you the consumer.

The reason hard inquiries exist is to show a pattern of recent activity that a consumer may have tried to obtain other lines of credit in a relatively short period of time. For many financial institutions this will create a red flag because it shows potential lenders that a consumer may be in the process of receiving significant amounts of credit. It depends on the consumer and the types of inquiries however and it may require some explanation when applying for credit. One possible situation is that a consumer may be living beyond their means and looking to obtain additional credit to make ends meet. By applying for additional credit cards a consumer could be shifting excessive debt by using balance transfers. Another possibility however is a consumer is looking to purchase a home or automobile and is shopping around for the best mortgage or auto loan. This will not be viewed as a negative as it is common sense to try and get the best interest rate and terms when making a large purchase such as a home or car.

The answer to "how long do inquiries stay on my credit report" is for at least one year. It is possible however for some inquiries to stay on a credit report for up to two years. This is an important consideration because inquiries, both soft and hard, appear on credit report instantly and should not be taken lightly. It is possible to shop around too much for the best loan and have an excessive amount of hard inquiries appear on your credit report. A consumer has the option to try and dispute a number of the hard inquiries but if the company who made the inquiry had a legal and authorized right to do so it will be next to impossible to have a hard inquiry removed.

It is possible for inquiries which appear on a credit report to negatively impact a consumers credit score. An excessive amount of hard inquiries can lower credit score by a few points which may mean the difference between two different interest rates on a mortgage. A higher interest rate will mean higher monthly payments and could effectively price a consumer out of the ability to get a new home or car. Remember that inquiries appear on a credit report for up to two years and adjust your behavior accordingly to minimize their impact.

Image by: Cyril Rana