What is a thorough investigation and how does it affect credit history?
What is a thorough investigation and how does it affect credit history?
  • A serious inquiry, also known as a direct inquiry, is a request to check your credit when you ask to borrow money through a credit card or loan.
  • Each thorough investigation will reduce your credit scores by a few points.
  • A serious inquiry ceases to be calculated in your credit score after one year and completely disappears from your credit report after two years.
  • Read more stories from Personal Finance Insider.

When you apply for a job, a potential employer may perform a background check to ensure they are not taking what they consider to be an unnecessary risk by hiring you. Similarly, when you apply for a loan, a lender will perform a credit check, known as a thorough investigation or rigorous extraction, to assess the risk you pose as a borrower.

A serious request may hurt your credit score slightly, but it shouldn’t stop you from applying for a new line of credit.

What is a difficult investigation?

When you apply to borrow money, the lender submits a request to a credit bureau to view your credit history, which is called an in-depth inquiry. This will provide them with a full report of your credit history, so they can assess how risky it is to lend you money.

Unlike informal inquiries, which are used in pre-approved offers that don’t require credit, serious inquiries are recorded on your credit report. They are also taken into account in the calculation of your credit score, which generally reduces your credit score between three and seven points.

However, you shouldn’t let a lower credit score after opening a new line of credit deter you from opening a new account. As long as you make your payments on time, you have more to gain from a new line of credit than you lose with the one-time drop in your credit. “In six months, that new account will start to become a good thing for your credit report,” says Jeanne Kelly, a credit development coach.

Why Does a Serious Inquiry Affect Your Credit Score?

Your credit score is a measure of how likely you are to pay off your debts. When a loan application triggers a serious investigation, it means that you are requesting a new line of credit, which adds an additional degree of uncertainty to the likelihood that you will follow through on your payments.

While one serious inquiry can hurt your credit rating, too many serious inquiries will add up and significantly lower your credit rating. It could also raise red flags for lenders, who will think twice before approving a loan. Kelly says creditors might ask “why is this person getting credit? What’s going on ? Why does she need the four or five new accounts? »

When looking for the best rates on a loan, you may face several difficult inquiries when submitting applications to multiple lenders. Fortunately, you are allowed to rate the store for 30 days after your first serious request. This means that any serious inquiries you get from your loan purchases will only be counted as one inquiry on your credit score, although all inquiries will still appear on your credit history.

How long do serious inquiries stay on your credit file?

A serious investigation will remain visible on your credit file for two years before depositing you. However, this will only be taken into account in the calculation of your credit score for one year.

You will not be able to remove an authorized serious inquiry from your credit report before the end of these two years. However, if you notice a serious inquiry into your credit history that you did not authorize, you can go to the credit bureau’s Dispute Resolution Center to resolve it. These inaccuracies could stem from a thorough investigation that a lender did without your permission or, more seriously, you could be a victim of identity theft, which means someone is trying to open a new line of credit using your personal information.

Hard investigation versus soft investigation

Sometimes a service provider, such as a utility company or apartment rental landlord, will do a credit check on you, even if they don’t offer a line of credit. This is called a soft ask or a soft pull. They do it to see how responsibly you manage your finances. For example, a landlord may not want to rent an apartment to someone with a history of defaulting on their debts.

There are several key differences between a deep investigation and a soft investigation. Most notably, a soft inquiry does not show up on your credit report. It also does not affect your credit score.

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