What is an inquiry?

An inquiry is a request by a lender to get a copy of your credit report. Along with new credit, inquiries make up approximately 10% of your credit score. The reason these two things are included in your credit report is research shows that opening several credit accounts in a short period of time represents greater risk, especially for people who do not have a long-established credit history. There are two types of inquiries—hard and soft.

A hard inquiry is one you initiate. For example, if you're looking for a home equity loan or to refinance your auto loan, you are giving lenders permission to look into your credit report. Because you may be a rate shopper looking for the best deal in town, you have somewhat of a "grace period" of two weeks in which 30 inquiries may be viewed as one. The exact number and time period may differ depending on which credit report the lender uses.

Credit reports do a good job of distinguishing between a search for many new credit accounts and rate shopping, which is generally not associated with higher risk. However, the number of hard inquiries you make will have a negative impact on your score. So, if you plan on rate shopping, it is best to do it within a short period of time.

A soft inquiry is one you do not initiate. You may sometimes receive offers in the mail letting you know you're pre-approved for a loan or credit card. In this instance, the financial institution offering you the loan had to look up your credit report before offering you the special deal. Because you did not initiate the inquiry, it will not affect your credit score.
If you order your credit report from a credit-reporting agency to check it for accuracy, which is a good idea, the score also considers this type of inquiry to be a soft one, because it's not an indication that you are seeking new credit.

One other thing to keep in mind is inquiries remain on your credit report for two years, but credit scores only consider inquiries from the last 12 months.

If you have additional questions regarding inquiries or your credit report, please contact our financial counselor, Joell Dickerson , at 816-361-4194, Ext. 6681, or joell.dickerson@mazuma.org. You may also reach Paula Wallace of Consumer Credit Counseling Services at 816-361-4194, Ext. 6258, toll-free 1-800-388-2227 or e-mail her at pwallace@cccservices.com.