What is a credit enquiry?

A credit enquiry is a record that shows when your credit report has been accessed by you or a third party. There are 2 main types of credit enquiries:

“Soft” enquiries are recorded any time you request a copy of your credit file. This includes when your file is accessed through your personal access and doesn’t really have an impact on your credit score. It’s always a good idea to check your credit report at least every three months.

A “hard” enquiry refers to any request for your credit file that’s made by a third party, such as a lender. For instance, every time you apply for a line of credit, such as a card or personal loan, home loan, car loan or utility account, the lender you’ve applied with will submit a request for your credit file.

This request is recorded on your credit history as a “hard credit enquiry”. Too many hard enquiries can lower your credit score and your chance of approval. it’s important to note that not any one particular credit enquiry will reduce you score by a set amount. Your credit score is calculated by an algorithm set by the credit reporting agency. What we can determine is that if there are frequent credit enquiries over a short period of time, this will most certainly lower your credit score. 

Both soft and hard enquiries stay on your credit report for 5 years.

When you apply for credit, a credit provider will request to access your credit report to assess your creditworthiness. This request will then be recorded as a credit enquiry on your credit report.

Credit providers are not required to obtain your consent to obtain a copy of your credit report for this purpose – the requirement is that credit providers give you notification that they will do so and that you agree to this taking place. 

What should I do when I have a credit enquiry I don’t recognise?

Contact the lender listed for an unfamiliar credit inquiry and ask it for details of the enquiry. This will help you determine if you authorised it or not.

If the lender agrees it has made a mistake, it should correct the error on your credit report or could indicate fraud activity on your credit file. 

How credit enquiries impact your credit score

Lenders use information from your credit history to help them determine your eligibility for loan products like credit cards and personal loans.

This includes the number of credit enquiries you’ve made. These enquiries stay on your credit report for 5 years and are then removed automatically.

If you have too many credit enquiries on your file in a short amount of time, it can negatively impact your credit score and your ability to get a credit card or loan.

Whether you are applying for a new credit card, home loan, or a car loan, your lender will first enquire about your credit history before deciding if they can extend a new credit line to you or not.

But if you have been shopping around for the best crest card or the best home loan offer, then beware. Too many credit enquiries can end up staying on your credit report and your credit score can take a hit.

So how long do enquiries stay on credit report and most importantly, what can you do to get rid of them? Let’s take a look:

What is a credit enquiry?

Anytime that a potential credit provider checks your credit report,  including banks, lenders, and even you yourself, it is recorded as a credit enquiry into your credit report.

In other words, an enquiry can be termed as a credit check. It occurs when a legally permitted request is made to see your credit reports by a person or a company (including a bank or any other financial lender).

Enquiries can be a result of various reasons such as:

  • When you applying for credit card application

-When you are a Director of a company you are in business and sign a director’s guarantee

  • When a pre-approved credit offer is sent to you ( BEWARE of these ) 

All of these enquiries on your credit file, irrespective of their effect on the credit score, fall into one of the two main categories: Hard and soft.

Hard enquiries

Hard enquiries can stay on your credit reports for up to five years and even affect your credit score.

These enquiries are created when you apply for a new type of credit (such as a personal or home loan, ​​or a credit card), and the financial institution checks your credit to make a lending decision. they can also be for telecommunication applications and Utility accounts such as Gas or Electricity. 

If you move home frequently and need to apply for these services to be re-located, it’s always important that you check with your provider that they will not be activating a new service and that they continue your old account via a re-location. this will prevent a new enquiry from appearing on your credit report thus lowering your credit score. 

So, when you apply for a new credit card, for example, the credit card provider will pull your credit report to check your score and determine whether you can be given the listed credit line, interest rates, fees, and benefits.

Since you are the one applying for the credit card, you explicitly give the service provider permission to perform a hard enquiry. There is no point allowing this action to occur if your credit report already contains adverse credit listings as you will likely be automatically declined. This is why you should check your credit report’s health before making any further credit application. 

Some common instances that create these hard pulls in your credit reports are:

  • Credit card applications
  • Loan applications for mortgages, auto loans, personal loans, student loan
  • Requesting for a credit line increase ( be careful in doing this even if you are offered a line of credit increase by your credit provider. Sometimes just simply by clicking the button ‘I agree’ this will automatically perform a credit check.) 

Should you notice any bad credit information of your credit report before you make a credit application, you could always talk to We Fix Credit to assist you to have these items removed before making any further credit enquiries. 

Soft enquiries

Soft enquiries occur when you check your own credit reports or when a company pre-emptively accesses your credit report to provide you with pre-approval offers. Unlike hard enquiries, these enquiries are only visible to you and do not stay on your credit file. It also does not affect your credit score.

So, when you check your own score and pull up your credit file, it is considered a soft enquiry and it does not affect your score in any way.

You will generally see these soft enquiry access records under the heading ‘File Access’ on your credit report. 

How do credit enquiries affect credit score?

Credit enquiries can definitely affect your credit score and can mean the difference between a future credit approval or decline. 

Your credit score can take a hit if you are shopping around for credit, that is, applying for a number of credit card applications or loans in a short span of time.

Not only will this affect your score on your credit file, but it can also tell lenders that you have been applying for way too many credit applications.

However, people that only have a short credit history may see a bigger change in their credit scores. In case you are particularly new to credit, multiple hard enquiries in a short span of time can seriously  cause a dent your credit score.

Does your credit score go up when a hard enquiry comes off?

Yes, your credit score does go up when a hard enquiry on your credit file comes off after 5 years. Sometimes it takes a few to drop off to build some momentum back into your credit score if there are a large number of enquires. 

There are two ways for a hard enquiry to be removed – You can either get the hard enquiries dropped off from your report by proving inaccuracies in the enquiries or you can wait for the hard enquiry to fall off itself, which takes 5 years. We Fix Credit may be able to assist you to remove some enquiries from your credit report and improve your credit score. You may only need a few removed to bump up your score to an acceptable level to borrow again. 

What is the impact of multiple credit enquiries on the credit score?

Multiple credit card/personal loans applications over a short period of time can easily turn your good score into a bad one quickly. Multiple enquiries, in addition to having a negative impact, influence rejections too.

Rejections on applications can adversely damage your score and your credit file. Therefore, if your score stoops below-par level, it can be due to the combined effect of multiple enquiries and ensuing rejections.

To avoid the insidious fallouts, you should carefully look at the lender’s terms and eligibility criteria, and refrain from seeking multiple credit cards/loans one after the other.

TIP: To avoid such a huge score reduction, you should wait for a minimum of 90 days between unsecured credit applications.

What is the impact of rate shopping on the credit score?

When it comes to borrowers who are rate shopping, many credit scoring models are lenient as they don’t evaluate all enquiries equally. Credit scorers evaluate such multiple enquiries differently because they know you’re shopping for the best rate and not trying to apply for multiple mortgages, car loans or personal loans. Unsecured loan products and BNPL ( Buy Now Pay Later products ) can have a severe negative impact on your credit score. 

We Fix Credit offers a wide range of credit score solutions and credit fix solutions for your credit repair needs. We offer a FREE no obligation consultation to explore those opportunities.