Part of your credit scores factors in the number of credit inquiries you have. A credit inquiry shows up on your credit report every time your credit report is requested. You might not realize this, but having your credit checked can actually lower your credit score. Ten percent of your credit score is determined based on these credit inquiries. So if you are getting ready to apply for a loan or just trying to raise your credit, you might want to read this first.
What Is A Credit Inquiry
When you apply for any type of credit, even a credit card, the lender gets a copy of your credit report. They are inquiring about your credit history and this is known as a credit inquiry. When you later check your credit report you will most likely see the credit inquiry that the lender did. You very well might see other inquiries from businesses, maybe even some you don’t recognize. About 10% of your credit score has to do with these credit inquires.
To protect people and their credit, the Fair Credit Reporting Act was created. It requires that businesses have an appropriate reason for reviewing your credit report. Acceptable reasons could include the following:
- To grant credit
- Collect a debt
- Underwrite insurance
- Employment
- License issuing by some government agencies
- Legitimate business transactions
If a company uses your credit report improperly or obtains it under false pretenses then they are violating a federal law.
Types of Credit Inquiries
Not all credit inquiries are created equal when it comes to affecting your credit score. The important ones are the ones that do put a ding on your credit report. These are some times called “hard” inquiries. These are ones that are being done because you are applying for new credit. Fair Isaac’s research shows that opening several credit accounts in a short period of time represents a greater credit risk. When the information on your credit report indicates that you have been applying for multiple new credit lines in a short period of time your score can be lowered as a result.
Some companies night even check your credit report because they want to offer you certain goods and services. An example of this would be when creditors send you a “pre-approved” offer. They are doing this because they have check your credit report first. Sometimes potential employers, businesses you have a relationship with, and even when you check your credit score, all count as an inquiry. These types of credit inquires are referred to as “soft” inquires and they do not affect your credit score. When you view your credit report you will have vision to all the inquires, but when lenders and creditors look at your credit report, they only see the voluntary inquiries appear.
New Credit Inquiries
Every time there is a new inquiry on your credit it has an effect on your credit score. Your credit score will likely only take a minor ding and that probably won’t keep you from getting approved for credit in the future. If you are someone who is trying to build up your credit then you should limit the number of new credit applications you fill out. Also, when you go to apply for a loan you want your credit score as high as possible. With this in mind timing could be everything so you might want to consider when the best time is to apply for new credit and when you should hold off. After all, you could end up being a few points away from getting the better 0% card offer.
[...] Credit Inquiries: When you apply for a loan, the lender will pull a copy of your credit report. The credit bureaus keep track each time your report is pulled. Each time a lender requests your report, an “inquiry” appears in your report. Inquires over the last two years are reflected in your report. The report lists both “voluntary” inquiries, which result when you request your report, and “involuntary” inquires, which results when lenders get your report to make a pre-approved credit offer to you. [...]