You’ve applied for multiple lines of credit and checked your credit score a few too many times. You’re not being approved, but you’re not sure why.
For starters, you should know that too many credit inquiries on your credit report will start to have a negative impact on your score. If you’re suffering from perpetual bad credit (despite your best efforts), there may be a deeper reason that your credit score isn’t as high as you would like, and multiple credit inquiries aren’t helping your cause. Let’s take a look at what types of things could be affecting your credit and how you can begin to fix your credit.
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How Do Credit Inquiries Affect My Credit Score?
Credit inquiries actually don’t individually affect your credit score that much. According to FICO, a single inquiry only affects your score by less than five points. As such, if you’re stressing about a single credit application or inquiry into your credit score, don’t. It shouldn’t have any lasting effects on your score.
However, if you’ve made multiple applications, or inquired many times about your score, that number will go up. Especially in the case where your credit history is quite bare, you might see a larger impact. If your credit history is short and you don’t have much credit to speak of, it could have a larger impact. If there are inquiries you did not authorize, you can dispute the inquiry with the credit bureaus.
There are two different types of credit checks; hard inquiries and soft inquiries. A hard inquiry is when a bank or lender checks your credit score and history in order to determine if you qualify for a loan. Hard inquiries will negatively affect your credit score, usually by only a few points per inquiry.
Soft inquiries include credit checks done by loan companies that want to pre-approve you for an offer that you haven’t applied for. It also includes free annual credit checks done by yourself. Soft inquiries will not affect your overall credit score.
This brings us to take a more detailed look into exactly why your credit score could be suffering. It might not simply be due to credit inquiries, and there could be other issues at play. Let’s get to know some other issues that could lower your credit score.
How Long Do Hard Inquiries Stay on Your Credit Report?
A hard inquiry will generally appear on your credit report for up to 2 years (12-24 months), but it should only impact your actual credit score for up to 12 months, or 1 year. So, each time you have a hard inquiry into your credit, you’ll see that item appear on reports from each of the three credit bureaus and stay on those reports for about 2 years, but your FICO credit score should only be impacted for a maximum of 12 months.
Why Isn’t My Credit Score Improving?
Making Payments on Time & Lowering Your Credit Utilization
Before applying for any new lines of credit, it’s always a good idea to step back and examine your financial habits. Making your loan payments on time is a huge part of your credit score. This means, if you’re paying on time for a while and then you miss a few months, those missed payments are still going to be considered on your credit report. The best thing you can do for your credit score is to work on consistency. Work on a reasonable budget and make your payments on time.
The second largest aspect of credit scoring is credit utilization, so if you work on making payments on time, you’re also working on the second issue. Credit utilization is a measure of how much credit you’re using in total as compared to what your maximum limit is. If your limit is $1000 and you’re using $995, your credit utilization is high. Your score will benefit greatly from paying off some of that debt.
Credit Report Mistakes
The next area that could be weighing down your credit is that you have mistakes on your report that you’re unaware of. In some cases, certain negative items may errantly show up on your history multiple times. Another example of that would be issues appearing as unresolved, even though they have been taken care of. This could happen if you’re working with a few companies to resolve a debt, such as a bank and a debt collector. We’ve provided sample letter templates and information on how to remove these mistakes.
Fraudulent Account Inquiries & Credit Applications
Lastly, if you’re making payments on time, lowering your credit utilization, and you’ve cleared up any mistakes and your score is still looking pretty sad, there could be a possibility of fraud on your account. If your personal information (like social security number) has been stolen, scammers may be opening new accounts in your name without your knowledge. These accounts are neglected, often over-utilized and never paid off, which has a terrible impact on your credit score. Plus, each time a new account is opened, you’ll have a hard inquiry drop your credit score a few more points. However, you will be able to see all open accounts on your detailed credit history report. If you’re checking for mistakes every year, which you should be, you most likely already saw some lines of credit that you don’t recognize. It is also possible to dispute having too many hard inquiries on your credit report.
Having multiple hard inquiries in a short time could drop your credit score. While credit unions will recognize if you are shopping around for a car, it’s better to not have too many inquiries in quick succession. If you suspect fraud or don’t understand why your score isn’t improving, it may be time to consider credit repair services.
For more letter templates and disputing items on your credit report, visit our dispute letter resource center.
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