What Happens When a Hard Inquiry Is Removed?

When seeking new credit, such as a loan or a credit card, lenders often review an applicant’s credit history to assess their creditworthiness. This review results in a record on your credit report known as a hard inquiry. Understanding hard inquiries and what happens upon their removal is helpful for managing your financial profile.

What Hard Inquiries Are

A hard inquiry occurs when a lender or company requests to examine your credit report as part of a credit application. This action is initiated when you apply for financial products like a mortgage, an auto loan, a personal loan, or a new credit card. The primary purpose of a hard inquiry is to provide the potential creditor with a comprehensive view of your financial behavior and repayment history.

Hard inquiries appear on your credit report and generally remain visible for up to two years from the inquiry date. Their influence on credit scoring models typically diminishes after 12 months. This differs significantly from a “soft inquiry,” which occurs when you check your own credit report or a lender pre-screens you for an offer. Soft inquiries do not impact your credit score and are not visible to lenders.

Hard inquiries can signal to lenders that you are actively seeking new credit, which may be viewed as an increased risk, particularly if multiple inquiries occur within a short timeframe. However, major credit scoring models, such as FICO, are designed to account for “rate shopping” for certain loan types. For instance, multiple inquiries for a mortgage, auto loan, or student loan within a specific period are often treated as a single inquiry. This allows consumers to compare rates without negative impact on their credit scores.

How Hard Inquiries Can Be Removed

Hard inquiries are removed from your credit report automatically after their two-year retention period expires. This natural expiration is the most common way these entries disappear from your report.

Beyond automatic expiration, a hard inquiry may be removed if it is found to be erroneous or unauthorized. This includes situations where an inquiry was made without your explicit permission or was the result of a clerical error by a lender. Another legitimate reason for removal is if the inquiry is linked to identity theft or fraudulent activity.

If you identify an unauthorized or incorrect hard inquiry, you have the right to dispute it with the major credit bureaus: Experian, Equifax, and TransUnion. The dispute process generally involves contacting the credit bureau in writing, explaining the error, and providing supporting documentation. You may also need to contact the company that made the inquiry to request proof of authorization. If identity theft is suspected, reporting it to the Federal Trade Commission (FTC) and filing a police report provides documentation for disputing the inquiry. Legitimate, authorized inquiries cannot be simply removed from your credit report at your discretion before their natural expiration.

The Effect of Removal on Your Credit Score

When a hard inquiry is removed from your credit report, the adjustment to your credit score is typically minimal. A single hard inquiry generally causes a small, temporary dip in a credit score, often around 5 to 10 points. Consequently, its removal results in a similarly small, positive adjustment, if any.

The actual increase in your score is not significant or immediately apparent, especially if other factors on your credit report are negatively influencing your score. Credit scoring models, such as FICO and VantageScore, consider inquiries as a minor component in their overall calculations. For example, inquiries typically account for approximately 10% of a FICO Score.

This minor impact means that even if an inquiry is removed, the overall effect on your score is negligible. Therefore, while the removal of an inquiry corrects your credit file, it does not lead to a substantial boost in your credit score.

Holistic Credit Health

While the removal of a hard inquiry has a minor positive impact on a credit score, it is only one small piece of an individual’s overall financial health. The most significant factors influencing credit scores are consistent on-time payment history and credit utilization. Payment history, which reflects whether bills are paid punctually, accounts for a substantial portion of credit scores, often 35% to 40% in FICO and VantageScore models, respectively.

Credit utilization, which is the amount of credit used relative to the total available credit, is another highly influential factor, making up about 30% of a FICO Score. Maintaining low credit utilization, generally below 30%, is widely recommended for a healthy score. Other components contributing to a strong credit score include the length of your credit history, the variety of credit accounts you manage, and the frequency of new credit applications. A longer credit history and a diverse mix of credit types signals financial stability to lenders.