Credit inquiries are requests from lenders or creditors to check your credit report. Each inquiry made on your credit report can lower your credit score. There are two types of inquiries: hard and soft inquiries. A hard inquiry is when a lender or creditor checks your credit report before making a decision on a loan or credit application. A soft inquiry is when you check your own credit report or when a lender checks your credit report for a promotional offer.
Multiple hard inquiries can lower your credit score and give the impression that you are constantly seeking credit. However, there are ways to minimize the number of inquiries on your credit report.
1. Apply for Credit Only When You Need It
Don’t apply for credit just because you can. Only apply for credit when you need it. Make sure you have done your research on the credit offer and that you meet the minimum requirements. Don’t submit multiple applications for credit at the same time because each inquiry can lower your credit score.
2. Limit Credit Applications
Limit credit applications to a few within a short period. This allows multiple inquiries to be counted as one. For example, if you are shopping for a mortgage, try to get all the necessary pre-approvals within a 14- or 30-day period so that they will only count as one inquiry.
3. Check Your Credit Report Regularly
Checking your credit report regularly allows you to be aware of any unauthorized inquiries or errors. You can dispute incorrect information through the credit reporting agency. You are entitled to one free credit report from each of the three credit bureaus every 12 months.
4. Choose Credit Cards Wisely
Choose credit cards that will help you build good credit. Avoid applying for too many store credit cards, as these inquiries can add up quickly. Instead, choose a credit card with a low interest rate and a rewards program that fits your lifestyle.
5. Consider a Credit Builder Loan
A credit builder loan is a small loan that helps you build or improve your credit score. Since the lender is aware that you are trying to improve your credit score, they will only make a soft inquiry. Once the loan is paid off, you will have a better credit score and fewer inquiries on your credit report.
In conclusion, minimizing the number of credit inquiries on your credit report will help improve your credit score. Use credit wisely and avoid applying for credit unless you need it. Check your credit report regularly and choose credit cards wisely. Consider a credit builder loan to help you build credit. Remember, a good credit score can lead to better interest rates and more credit opportunities.