Credit Inquiries - Do They Really Lower Your Score
BY David Zwierecki
Credit inquiries can account for roughly as much as 10 percent of your total credit score. This means that if the maximum credit score possible is an 850, credit inquiries could affect your score by as much as approximately 85 points, although you would truly need to have a lot of inquiries in order to see anywhere even close to this type of impact on your credit score. Wow, 85 points can be quite a big swing for anybody when it comes to their credit score. So let us find out about what inquiries affect your score and what inquiries do not.
Soft Credit Inquiries
Soft credit inquiries are those that are requested by yourself to check your own credit, those made by businesses to extend offers or services to you, those initiated by businesses that you already have an account with, and inquiries that are made by possible employers. These inquiries will most likely still report to your credit report, however they will not affect your credit scores good or bad. Therefore, this debunks myth number one that if you check your own credit your credit score will suffer.
Hard Inquiries
Hard credit inquiries are those that will affect your credit score and they are initiated by a creditor when you apply for an auto loan, a credit card, personal loan, cell phone, mortgage, or anything else you authorize a lender to pull your credit for in order to obtain some type of financing. These inquiries can affect your credit score and bring your scores down if you have a lot of them in a short period of time. There is some truth to the myth that every time you apply for financing your score can go down. However, read on to find out the specifics to this one.
Credit inquiries can affect different people in different ways. For example a person who has 5 new accounts opened up within the past couple of months is more likely to take a bigger "hit" to their credit score for the number of credit inquiries that they have, as opposed to someone who simply has only 1 new account opened in the past couple of month with the same number of inquiries. Why do credit scores lower for the number of inquiries that you have? The more inquiries you have puts you in the class of looking for more credit which increases a person's risk. Credit inquiries will normally not affect your credit score by very much unless you have a lot of inquiries on your credit report within a short period of time.
Inquiries from Rate Shopping
If you are shopping for a mortgage loan or an auto loan, you will generally always have a 30 day window to do your rate shopping and all inquiries made within that 30 day period of time will only count as 1 inquiry against your credit score. Older credit scoring models used to have a 14 day window and the newest credit scoring models are now increasing this to a 45 day window. To be safe though, plan on having a 30 day window to shop around for the best financing deal for your auto and mortgage needs. Some lenders pull their clients credit using older scoring models because they are normally cheaper than using the newest credit scoring models that have just come out. This debunks the myth that you can not shop around with other companies or have multiple companies pull your credit or else your score will go down. This has been an old sales tactic that many people have used for a long time to try and prevent their clients from shopping around elsewhere.
Therefore, credit inquiries can definitely affect your credit score, they should not limit your ability to shop around for a mortgage or auto loan with multiple companies, and you should limit the number of creditors that pull your credit for financing purposes. Do not be afraid to shop around, but try to keep all of your inquiries within only a couple of days from each other to make sure you are comparing similar rates.
ABOUTH THE AUTHORThe author of this article, Dave Zwierecki, is the President of First Security Financial Services and has over 10 years of experience in the credit and mortgage lending fields. For more information and tips please visit http://www.gofirstsecurity.com or http://www.TheMortgageU.com/bad-credit/credit_inquiries.htm |
