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“Soft” inquiries – even lots of them – will not bump off or remove “hard” inquiries on your credit reports. This is because all inquiries stay on your credit report for two years, and hard inquiries count against you, for the purposes of calculating your FICO scores, for one year.

What Is the Difference Between a “Hard” and a “Soft” Inquiry?

A hard inquiry in your credit file is a record of any application for credit that you made. For example, if you seek a mortgage, student loan or car loan, or even if you apply for a credit card or perhaps request an increase in your current credit card limit, any of these actions can result in an inquiry on your Equifax, Experian or TransUnion credit files. Other business-related transactions can also produce inquiries: Among them: signing a cell phone contract, launching new service with a utility provider (like a local gas or electric company), filling out an apartment rental application, and – as even using a debit card to reserve or pay for a car rental. All of these activities generate inquiries that are known as “hard” pulls. By contrast, when you examine your own credit report, or when an existing creditor does a review of your credit files, those are called “soft” pulls, and they do not impact your credit score. So let’s say you use a credit monitoring service, and you review your credit report each month – or even weekly or daily. Those “soft” inquiries will be noted on your credit files, but they won’t hurt your FICO scores, and they won’t make your “hard” inquiries go away.

Don’t Allow Excessive Hard Inquiries of Your Credit Files

The American Bankers Association says a single inquiry can drop your credit score by 35 points. According to the formula used by Fair Isaac Corporation (the company that created FICO credit scores), inquiries account for 10% of your score. So think about it this way: If your FICO score is 680 points, inquiries account for 68 of those points. Obviously it’s not that simple, because different elements of FICO’s formula are weighted differently, based on a slew of considerations. And inquiries can have a greater or lesser impact on your score depending on the length of your credit history and other factors. Nevertheless, to minimize the impact of inquiries on your credit rating, only apply for credit when you truly need it. And if you have to shop around – say, for a mortgage or a new car loan – do so within a concentrated period of time. FICO executives say that multiple inquiries for auto financing or home loans are treated as a single inquiry, so long as the inquiries all occur within a 14-day period. The idea, according to FICO, is for them to avoid penalizing consumers for shopping around for the best rate.

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Question: My Husband Has a Motorcycle Loan in My Name That I Did Not Sign For. I Have Knowledge of the Loan But Did Not Sign For It. We are Having Marital Problems Now. I Have Disputed This Loan With Equifax and They Will Not Remove It. He is Not Making Payments On Time. What Can I Do?

Answer: This is a very unfortunate situation because it sounds like even though you didn’t personally sign for the motorcycle loan, you knew that you husband was getting the loan in your name (i.e. using your credit in order to get the loan). Even if you didn’t know what he was doing, your recourse and options are going to be limited because I assume that many months (maybe years) have passed since he originally got the loan. The time for you to speak up about it – or to let creditors or the credit bureaus know that you did not authorize the loan – would have been immediately after you learned of this. If he took out a loan without your knowledge, authorization or consent, then that is identity theft. If you can prove that it was fraud, perhaps by showing that it was not your signature on the loan contract, then you may have an outside chance at getting this loan off your credit. However, that may be a long shot. Weren’t the statements coming to your house each month and didn’t you see them? Doesn’t your husband live in the same home with you and didn’t you ask how he got a motorcycle? How long has it been that he’s had that motorcycle? I know these questions may sound harsh. But from the financial community’s perspective, it may seem like you are complaining about being on the loan now that you and your husband are having marital problems and he is not making the payments.

Under the law, if your name is on a credit account with your husband, (such as a mortgage, credit card or car loan), then you are both liable for that debt – even if you divorce. Right or wrong, that’s the law – and not just in community property states either.

Evaluating Your Other Options

Since your husband is not making timely payments, you have a handful of other options:

a)      make the payments yourself – and preserve your credit rating;

b)      try to convince him to pay on time

c)      see if you can work out a voluntary repossession, where he would turn the motorcycle back into the lender/finance company (but your credit would be impacted)

d)      consider whether a financially responsible family member or friend can take over the payments and use the motorcycle, which will relieve your husband of paying each month and may also keep your credit intact

What to Do With the Credit Bureaus

Additionally, if you think that divorce is likely, I would start closing out all joint accounts and notifying your creditors of your impending or actual separation. You should also put a credit freeze on your credit files so that no new credit can be obtained in your name. Lastly, pull your credit records from Equifax, Experian and TransUnion, and sign up for a good credit monitoring service for the next year or so. You want to make sure there are no other accounts opened by your husband of which you may not have been aware.

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Q: My Mom Will be the Principal on a Car Loan, I will be the Co-signer, Will This Negatively Impact My Credit?

A: Becoming the co-signer on a new car loan will not hurt your credit score unless you or your mother fail to meet the terms of the car loan and start to miss payments.  Your email indicated that you already have many charge-offs on your credit records. Therefore, your credit scores are likely to already be very low, which means you will not qualify for a home loan, something else you also asked about.  People who buy their FICO credit scores or subscriber FICO’s credit monitoring service (http://www.Myfico.com) can get access to an online credit simulator which can show you want actions you need to take to increase your credit scores to qualify for all kinds of loans.

Question:

I have a question from a reader today who wanted to get some information about an auto that was actually repossessed via voluntary relinquishment. He wrote to me saying, “I’m recently divorced, and my ex decided to voluntarily relinquish a car that was in both of our names just before our divorce was final. I got a letter from a collection agency demanding more than the car was originally worth. The divorce papers state we’re equally responsible, but I know she’ll never pay because she can’t even pay child support.” He said he has custody of his child and can’t afford to pay anything at this time without some help from her in terms of keeping up with all of his other bills. So his question really boiled down to this. He said, “I pulled my credit report, and it shows the repo, but it also shows an amount on the report that is less than a quarter of what the agency is demanding. Can I use this information as a bargaining tool to get them to settle?” He also mentioned he was told to file bankruptcy, but he’d already done that back in 2005.

Answer:

First off, no, don’t think about filing bankruptcy just due to a car loan that was in both your and your ex‑wife’s name, even though the amount owed might be considerable relative to your income. What I think you should do is, yes, by all means, try to negotiate with the collection agency that has reached out to you, and let them know, in no uncertain terms, that you are cash‑strapped, that you are a single father, that you’re raising your child on your own, and that the amount that was due, obviously, you’re aware of the fact that it’s legally your responsibility and your ex’s, but that they’re asking for a multiple of what is the amount that the car was actually worth and three to four times what’s actually shown on your credit report.

Don’t be afraid to let them know that you have seen your credit report recently and that you know that there’s a huge difference in terms of the amount that they’re trying to demand and the amount that’s shown on your credit report. I would suspect that this will be a huge point of leverage to use in the course of your negotiations, because a lot of times collection agencies try to say, “Look, we’ll ruin your credit. We’ll put something on your credit report.” And your defense to that is, “Hey, the information is already there. It’s already showing up on my credit report. I’m merely trying to clear up the matter.”

What I would suggest that you do, in terms of offering a settlement amount, is either try to pay a lump sum and get it all done and over with in one fell swoop, or only commit to a monthly amount that is modest and firmly within your reach in terms of paying every single month without fail. I don’t like the idea of a monthly payment plan to pay off an old collection account, especially for a repossessed car that you’re not getting any value out of, as much as I like the idea of doing a lump sum.

If you negotiate a lump‑sum payment to pay off X amount and get this debt taken care of once and for all, try to get something called a PFD, or a pay for deletion. That’s where you agree to terms with the collection agency about an amount that will settle up the past‑due bill, and that amount will be considered acceptance of payment in full. In exchange for you making that cash payment, the collection agency will agree to delete all negative information from your credit reports, that is, from your Equifax, Experian, and TransUnion credit reports. They won’t always agree to this, but you should certainly ask for it.

If you can get them to do this and to agree to that, make sure you get a letter in writing from the collection agency, upfront, before you turn over any money. That letter would be proof that you might need later if they don’t hold up their end of the deal and if you have to go to the credit bureau and dispute the information and say, “This was supposed to have been deleted from my report because I paid it per an agreement between myself and the collection agency.”

So I hope this information helps you. Good luck raising your child.

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Q: I Have a Car That Was Repossessed About 5 Years Ago. My Credit Report States That It Will Report for Another Year. Is That True That It Will Fall Off or Will It Be Reported By Another Company. If So, Should I Try to Settle the Debt?

A: Negative information (such as late payments) generally stays on your credit report for seven years. So yes, your credit reports are likely accurate in indicating that in about a year or so, that car repossession – which is already about 5-plus years old – will be deleted from your credit files. If you make a lump sum payment to settle the account, or even make partial or monthly payments, then you would “reactivate” this account, so to speak, and extend the length of time for which is will be reported on your credit files. I suspect that you may have seen this information on your Experian credit report because Experian credit reports contain a unique feature that many users find extremely enlightening.

Experian Credit Report Highlights

For all of the accounts listed in your credit file, Experian shows you “Status Details” indicating when an account is scheduled to fall off your credit report. For example, an auto loan that you paid off and closed in July 2008 will show the following Status Details: “This account is scheduled to continue on record until July 2018.” Or let’s say you had an account go to collections and ultimate get written off by a creditor. In your case, the negative information is your car repossession. For you and anyone else with these and other negative marks in your credit file, you won’t have to wonder how long a certain blemish will haunt you. That critical “Status Details” section of your Experian report will give you that precise information.

No Need to Settle Very Old Debt

Regarding settling your debt, unless you’re in desperate need of getting that car repossession off your credit report before a year’s time (this might be true, perhaps, if you need to qualify for a mortgage), and unless you’ve got thousands of dollars sitting around to pay off that old car debt, I wouldn’t bother trying to settle the account. It’s already been on your credit report for nearly six years. I would simply tough it out for the next year or so until it falls off your credit.

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