One the things that are quickly becoming common knowledge these days is the fact that every time some business or organization inquires about your credit score, this decreases the value of your score itself. There are those who tried to refuse this as a myth, but the fact remains that this is 100 percent fact.
Every time you try to get a loan of some kind, the institution you go to acquire the loan, whether that is a car dealership, bank, or other financial institution performs a credit check to see if you are of good risk for them to lend money to. As part of that inquiry, they then determine the interest rate that you would receive and the amount of money they would be willing to lend to you.
Sadly, this also means that an inquiry will cause your score to decrease in value. Every time that a credit check is run, it is viewed by the credit agencies as a likelihood that you will be receiving a future loan, which makes you less of a real risk to lend to. Silly, but true.
This Is a Hard Inquiry
This kind of credit check is referred to as a hard inquiry. What that means is that every time a business looks into your credit history before determining if they will lend you money or offer you some form of a line of credit, the credit score organizations treat this as a hard inquiry upon your account.
There are two different kinds of classifications of queries out there: soft and hard. A soft inquiry does not affect your credit all. This is done when you check your credit score; a credit agency performs a check on your credit to determine if they are going to offer you some promotional account, or if an organization where you have a credit account through is looking to increase your line of credit or to offer you an additional account.
These credit checks do not affect your credit score at all. They are seen by the credit reporting agencies as a simple review of credit but not increase or decrease in any way.
This is not right of the hard inquiry. In the case of this kind of question, the assumption by the credit agencies is that you are going to be looking to get a loan which is going to mean that your ability to pay future debts is diminished.
For example, if you go into a car dealership to purchase a new vehicle and they run a credit check to see if you can get a loan to buy that car the credit agency treats it as if you have already received a loan, even if that is not the case. As a result, they automatically lower your score simply for having your credit checked. That seems pretty unfair, but that is the way that it works.
How Long Does This Inquiry Appear?
If this has not made you irritated enough, you need to know that for the three major credit agencies, how long do hard inquiries stay on credit report – Advice from AAA Credit Guide. It’s for about a two years period. However, it only affects your credit score for one year.
If you are shaking your head in frustration that it would even appear at all, you are not alone. Many consumers have sought to try to have these hard inquiries removed as a factor affecting their credit score, but that does not look to be the case anytime soon.
The credit agencies use these hard questions as a means to try to stop you from continuing to borrow money from different lenders. In essence, they are trying to protect you from yourself. If you are aware that your credit score will drop every time you make a hard inquiry, then you are more likely only to try to get some loan once or twice a year. To do otherwise could have a severe impact on your credit score, which is why you will likely be more cautious about trying to borrow money.
Whether you like this or not, the hard inquiry is here to stay this is going to be on your credit report every time you go and attempt to borrow money from someplace, so be smart and limit the number of loans you are looking to take out each year. This will not only help to keep your credit score higher but will also help you to avoid getting yourself into further debt.