How to Deal with Unexpected Credit Inquiries

Did you know that a single credit inquiry could impact your credit score? If you're unsure how this happens or how to deal with it, you're not alone. A focus group from the Consumer Financial Protection Bureau found that hard and soft inquiries are some of the most puzzling topics in the credit world. So, if you’re still asking yourself, “What are credit inquiries?” read on and we’ll break down the difference between soft and hard pulls, how unexpected credit checks can affect your score, and what to do if you find unauthorized inquiries on your credit report.

What are credit inquiries?

A credit inquiry is, in the simplest terms, a posting on your credit report indicating when an entity – such as a lender - checks your credit history. Think of your credit report like a resume that shows all your financial experiences in one place or a report card that grades you in various domains, such as mortgages, credit card payments, loans, and more. You might get a credit inquiry if:

• You’re applying for a loan – Lenders use your credit score to determine whether to approve loans (like mortgages, car loans, or personal loans). A lower score can lead to higher interest rates or even loan denials.
• You’re applying for an apartment or house – Whether you’re renting or buying, many landlords check your credit history when considering your application.
• You’re applying for a job – Some employers may perform credit checks, especially for positions that require handling finances.

Soft pull vs hard pull: what’s the difference?

Credit inquiries are checks made on your credit history. They come in two main types: soft pulls and hard pulls. Soft pulls do not impact your credit score, while hard pulls do.

Soft Pulls
Soft pulls are credit checks that do not impact your credit score. For example, your credit won't be affected when reviewing your credit report through AnnualCreditReport.com or through myFICO. Pre-approved credit card offers are also often based on soft pulls, and when some employers perform credit checks on you during a job application process; those tend to be soft pulls.

Hard Pulls
Hard pulls are credit checks that can impact your credit score. When you apply for a new credit card, mortgage, auto, or personal loan, the lender typically performs a hard pull. Additionally, some landlords may perform hard credit checks on prospective tenants – be sure to ask your prospective landlord if you are unsure.

Why are unexpected credit inquiries a problem?

Hard inquiries can lower your credit score. Unauthorized hard inquiries can occur when someone uses your personal information to apply for credit, such as a loan, or a mortgage in your name.

How to spot unauthorized credit inquiries

The easiest way to spot unauthorized credit inquiries is to monitor your credit report consistently. As you check, look for sudden drops in your score or inquiries from companies you don't recognize. The myFICO Free Plan is a great way to be alerted to inquiries on your credit file at Equifax.

How to handle unexpected credit inquiries

1. Check your credit report — Visit AnnualCreditReport.com to access your free annual credit reports from Equifax, Experian, and TransUnion. Then, carefully examine the "Inquiries" section of each report. Alternatively, sign up for a myFICO subscription and get notified by email and/or mobile app push notifications when new inquiries hit your credit file.
2. Identify the inquiry type – Soft pulls generally don't impact your score, even if the pull is unexpected. If it's an unexpected inquiry, research the company listed to see if you have any recent interactions with them, like loan or credit card applications.
3. Dispute unauthorized inquiries – If you believe an inquiry is unauthorized, submit a dispute letter to the credit bureau that reported it, or better yet, submit your dispute online. If possible, contact the company that inquired to see if you can work it out directly with them.
4. Protect against future inquiries – If you suspect that you have been the victim of identity theft, ask the bureaus (Experian, Equifax, TransUnion) about setting up fraud alerts. These alerts notify potential creditors that you may be a victim of identity theft. You can also place a lock or freeze through the bureaus, which restricts access to your credit report. Most importantly, continue to review your credit reports and monitor your credit score for any suspicious activity.

How do hard credit inquiries affect your credit score?

Hard inquiries can lower your credit score, on average, five to ten points. Hard credit inquiries may lower your score because they indicate to lenders that you are seeking new credit you have yet to prove you can manage, which could suggest increased financial risk to lenders.

Hard inquiries typically remain on your credit report for up to two years. However, FICO Scores only consider inquiries from the last 12 months.

Hard inquiries may also have a more significant effect when multiple inquiries occur quickly. For recent versions of the FICO Score, numerous hard inquiries of the same type (student, auto, or mortgage loans) within a 45-day window are counted as a single inquiry. This is often referred to as the "rate shopping window." For older versions of the FICO Score, this rate shopping window period is a 14-day span.

Managing credit inquiries

If there's one thing you take away from this article: Checking your credit report is the key to identifying unauthorized inquiries that can negatively impact your credit score. Be sure to take proactive steps for your credit health, including setting fraud alerts, locking your credit file if you feel you’re at risk, monitoring your credit score, and reporting suspicious activity.