Can You Bump Hard Inquiries Off Your Credit Report By Monitoring With Soft Inquiries?

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Can You Bump Hard Inquiries Off Your Credit Report By Monitoring With Soft Inquiries?

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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.

Will opening a department store credit account hurt my credit score?

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Author: The Money Coach

Q: I am a Student at Southeast Missouri State University. About 10 Months Ago I Opened My First Student Credit Card. I Eventually Got My Credit Score to 728. In October, I Opened an Account with a Jewelry Store in Order to Buy an Engagement Ring. I’ve Noticed a Huge Dive in My Credit Score – Nearly a 50-Point Decrease! Should I Cancel the Credit Card From the Jewelry Store After I Pay the Ring off in 15 Months, and Just Keep My Student Credit Card?

A: As disheartening as it has been to see your credit score decline, don’t close out your jewelry store account. Your score probably dropped — after opening that new account and charging the engagement ring — because you have a relatively thin credit file, and not much information in your credit reports on which you can be evaluated. By opening that jewelry account, you generated an inquiry on your credit report, which undoubtedly impacted your credit rating. Inquiries account for 10% of your FICO credit scores. Inquiries stay on your credit files for two years and they count against your FICO score for 1 year. So just concentrate on paying down your debts and making all payments on time on both cards, as you have been doing. These two strategies will definitely boost your credit scores over time. But if you cancel the jewelry store card – now, or in another 15 months or so — you risk doing further damage to your credit. Read on to discover why.

How Your FICO Scores are Calculated

There is a lot of misinformation about what goes into your credit score. However, Fair Isaac officials have said many times that this is the heart of what happens: Your credit files – currently those from Equifax and TransUnion – are reviewed. Certain information (roughly 22 items) about how you’ve managed your credit is statistically analyzed. Ultimately, five different categories are weighted to produce your FICO score. Here is the breakdown of those five areas that contribute to your FICO score:

The Formula That Governs Your FICO Score

1.   Payment History: Approximately 35% of your score is based on this category.
2.   Amounts Owed: About 30% of your score is based on this category. (Mainly, you’re evaluated based on how much credit card debt you have).
3.   Length of Credit History: Roughly 15% of your score is based on this category.
4.   New Credit or Inquiries: Around 10% of your score is based on this category.
5.   Types of Credit in Use: About 10% of your credit score is based on this category. (Having a good mix of credit in your credit files is viewed favorably, although some forms of debt, such as mortgage debt, is scored more positively than other forms of debt, like department store cards or furniture store cards).

Based on this information, as well as other advice FICO freely disseminates on its website (http://www.myfico.com) and elsewhere, you can draw some good general conclusions about what actions can help your credit – and what could hurt it. For example, to increase your credit scores:

Pay Your Bills on Time

Payment track record is the largest component of your FICO score
Even if you must make “minimum” payments, do it!
One late payment can drop your FICO score by 60 to 110 points

Maintain Low Credit Card Balances

Don’t “max out” any cards
Try to not to use up too much of your available credit limit
Spread out debt over several cards instead of carrying big balances

Keep Your Older, Established Accounts Open

Longer credit history is scored favorably
Resist the urge to close an account when you pay it off
Closing accounts can sometimes lower your FICO credit scores

How can I remove negative information from my credit report so that I can qualify for a home loan?

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Author: The Money Coach

Q: I am Trying to Get Pre-Approved for a Home Loan, So I Have Been Tracking Credit Reports and Scores Daily. There are 3 Hard Inquiries That Would Boost My Score Some 30 Points, Once Removed. They Were Supposed to Be Removed as of 02/01/2010. The Inquiries Were Pulled on January 9, 2008. Since These Are Only Supposed to Be on My Credit for 2 Years, What Can I Do So That the Bureaus Update My Reports and Remove These Inquiries?

A: You are correct that inquiries are only supposed to last for two years and been seen for those two years on your credit report. However, in terms of your FICO credit scores, it’s the hard inquiries that occurred within the past 12 months that will lower your score. So I’m not convinced that removing those 3 hard inquiries will get you that 30 point rise in your score you anticipate. It’s possible. But just realize that a whole host of factors go into the overall calculation for your credit scores; inquiries are just one part of the picture. Having said this, I believe you can get those inquiries more quickly removed in order to make sure you qualify for the best possible mortgage loan rates and terms. Get the information changed by doing one of two things: disputing the information with the credit bureaus or using “rapid re-scoring.” Read on for more details about both options.

Using Online Dispute Services at the Credit Bureaus

To eliminate those old inquires, you can use the online dispute services offered by the credit bureaus. Just go to their websites and dispute the inquiries online at Equifax, Experian and TransUnion on the grounds that this is old, outdated information. By law, outdated information is not supposed to appear in your credit files. You can dispute mistakes with the credit bureaus by mail or telephone, but you’ll get the fastest results if you initiate a dispute online. Here are the websites and phone numbers you should use for the credit bureaus when you contact them to dispute errors:

http://www.investigate.equifax.com or 888-800-8859

http://www.Experian.com/disputes or 866-200-6020

http://www.Transunion.com/investigate or 800-916-8800

Don’t pay for any credit reports at the bureaus. Just use the links I just provided and get a free copy of your report, if necessary, on the grounds that your account contains inaccurate/outdated info. I’ve had outdated and inaccurate information to my credit reports fixed very, very quickly – in just a day or two.

Use Rapid Re-Scoring

Another option: have your lender or mortgage broker do something called “credit re-scoring” or “rapid re-scoring.” Credit re-scoring allows bankers, mortgage brokers, and other lenders to submit proof of a mistake in your credit file directly to the credit agencies. The proof has to be something official, such as a letter from the IRS showing that a tax lien has been paid or a court document that indicates a previous bankruptcy was discharged on a certain date. With satisfactory proof and a request from a mortgage professional, the credit agencies give your file priority status, and quickly update your credit information electronically. It usually happens in two or three days. This way, an error in your credit file doesn’t cost you more money or jeopardize your chance of getting a mortgage. In your case, I’m not certain what documentation can be supplied to the credit bureaus. A simple letter from your lender may suffice as the date of the inquiries themselves will be self-evident to the bureaus.

Get Your Lender Involved

One limit to this process, however, is that you can’t initiate a request for credit re-scoring on your own. Only lenders and other mortgage professionals can do so. The good news is that some companies, such as Novi, Michigan-based Credit Technologies (http://www.credittechnologies.com), can help you connect with a lender that can request credit re-scoring on your behalf. Credit Technologies provides this information free of charge to consumers. They’ll even email it to you, so you can get a list of lenders quickly. Alternatively, if you already have a lender, but they don’t know about credit re-scoring, have the lender contact Credit Technologies directly at 800-445-4922 in order to do credit re-scoring. Credit Technologies doesn’t guarantee that your score will increase as a result of credit-rescoring, but the company does report that the typical client experiences a 30-point jump in his or her FICO score.
If you can get your lender involved, your credit report will be updated much faster than you could have done on your own. Fixing erroneous information that is lowering your FICO score could mean the difference between your getting a so-so deal on your mortgage, or getting a home loan with a great rate and attractive terms. Good luck!

How Can I Get Rid of $15,000 in Debt and Improve My Credit After Graduation?

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Author: The Money Coach

Q: I Am a 25-Year Old Single Mom Who Will Earn a B.A. in Education in May. How Can I Get Rid of $15,000 in Debt (Not Including Student Loans) and Improve My Credit After Graduation?

A: To quickly knock out your credit card bills and boost your credit, try using these five strategies:

Step 1: create a realistic budget

Look at your income and your outgoing expenses closely to ensure that you are not overspending and digging yourself further in debt. If you are deficit spending (i.e. spending more than you take home), then slash your budget until your expenses are less than your income.

Step 2: contact your creditors and negotiate

As creditors for whatever you need — a lower interest rates, the elimination of late fees, over-the-limit charges, a change in your payment date, etc.

Step 3: start an emergency fund

Slowing building up an emergency fund or a cash cushion is a big step in avoiding debt and keeping your credit rating as high as possible. Even if you can only save $50 a month – do it. Your emergency fund helps you out of jam if any unexpected bills pop up. You will be able to have a little extra cash to handle those emergencies, without putting unnecessary expenses on your credit cards.

Step 4: only apply for credit if you absolutely need it

Anytime you open new loan accounts – i.e. credit cards, auto loans, etc. – an inquiry goes on your credit report and can lower your FICO credit score. Stay away from department store credit cards and other offers for credit that you really don’t need.

Step 5: Start tracking your recurring bills

Even if you don’t have traditional forms of credit like an auto loan or a mortgage, you can start to demonstrate credit-worthiness and build your credit rating by tracking those non-traditional monthly bills that you do have. Examples might be: the payments you make to your daycare provider, payments to utility company, rental payments, and so on. Track these through Payment Reporting Builds Credit (http://www.prbc.com). This is a way to build your credit without taking out additional debt.

Follow these tips and you’ll be on your way to quickly becoming debt-free and enhancing your credit rating.

Ask The Money Coach

Posts Tagged ‘inquiries’