How Do Credit Inquiries Affect Me?

credit-inquiries

An inquiry occurs on your credit report anytime you apply for credit.

While a few inquiries are fine, too many can result in lowering your credit score. In some cases, it may even result in a denial of credit! What this signals to creditors is that you may be “desperate” and therefore may hinder your chances of receiving credit or a loan.

Not all credit inquiries are created equal! So in order to be able to keep your credit score high and report gleaming, it is important to understand the difference between various inquiries.

You

When you request a copy of your credit report or score, it is considered a “soft” inquiry. This is not seen by your potential creditors and has no negative effect. In fact, it is encouraged that you review your reports from all 3 bureaus (Experian, TransUnion, Equifax) at least a couple of times per year. Access your credit reports for free at annualcreditreport.com.

Credit Bureau

Credit bureaus may review your file from time to time. These internal inquiries do not appear on the copy of your report that goes to potential lenders and therefore has no negative effect on your credit.

Creditor Review

This is simply a standard review that is done by creditors you have an active and existing relationship with. A creditor review is also considered to be a soft inquiry and has no impact on your credit.

Credit Request

This occurs when you apply for a credit card or loan and it is reported on your file. These are the most common types of inquiries and remain on your profile for up to 2 years. Since creditor requests are an inherent part of the process of acquiring credit, they only have a negative impact if you have too many within a short period of time. In some cases, lenders may overlook a number of similar inquiries within a short period of time. This is because they understand you may be shopping around for the lowest rate (for a mortgage or car loan, for example). In fact, the newer versions of FICO Scores already take this into consideration. They have been developed to allow for “rate shopping”, to help reduce the negative impact on your score.

Collection Agency Review

Inquiries from a collection agency are considered to be hard inquiries. They can therefore have a negative impact on your score. However, it is important to make sure that the debt in question is valid. If you dispute a debt and it turns out that the collection agency made a mistake, you are entitled to request that the relevant negative information on your credit report — including the hard inquiries — be removed.

Keep in mind that when applying for credit or loans it is unavoidable to be subject to hard credit inquiries. Just remember that those inquiries, when done appropriately, can have the desired effect of credit granting and the subsequent responsible use of credit can have a positive influence on your score. Being aware of the types of inquiries and how they affect your score is key to keeping it healthy. If you are unsure of the type of inquiry that will be made, don’t be afraid to ask before proceeding.

If you want to learn more about credit, consider picking up a copy of Life & Debt!

Share on FacebookShare on Google+Tweet about this on TwitterPin on PinterestShare on LinkedIn

Tags

2 comments

  • Great post but I was wondering if you could write a litte more on this subject?
    I’d be very grateful if you could elaborate a little bit further.

    Appreciate it!

    • Lea DeRosa Lea DeRosa /

      Hi Sandra,

      We add new blogs every week and cover various topics related to credit regularly. Please check back soon for more!

Leave a Reply

Your email address will not be published.

Call Us Now to Get Started (866) 890-7337

What People Have to Say

I just wanted to thank your entire staff at The Law Offices of Leslie H. Tayne, for helping me get out of debt. If it wasn’t for your firm, I would have never been able to resolve my $13k worth of debt in less than 3 years. Your staff did a great job, I was finally able to buy myself a brand new car without using a cosigner. I can’t tell you again how happy I am. I would recommend your services to anyone.

L.C. Client 2007-2009

I sleep like a baby at night now because of the work that you and your office have done. Rest assured that I will refer anyone I know to your office with conditions that are similarly circumstanced.

R.S. Client 2012-2014

You have been very helpful at first directing me in the right direction when I had no clue how to go about handling everything, I really appreciated all your advice and help and hope we can work something out. Thanks again for all your help and kind words, and patience.

D.M. Client 2009-2012

close
Facebook IconTwitter IconLinkedInLinkedInLinkedInLinkedInLinkedIn