Inquiries – Do They Hurt Scores?

Uncategorized Feb 05, 2014 Comments Off on Inquiries – Do They Hurt Scores?

When someone accesses your credit it establishes an inquiry which appears on your credit record. There are 2 types of inquiries, one will negatively affect scores and one will not.

The first form of inquiry is when a creditor accesses your file to determine if you meet their lending criteria. The key is that this inquiry is done WITHOUT any application being submitted by you. In fact, it is usually a means of finding consumers to which they will make credit offers. In other words, they will look at your credit prior to offering you credit. These are known as SOFT PULLS and do not affect your scores because it is not an application initiated by you.

The second form of inquiry is where you are applying for credit and the creditor accesses your report to see if you qualify. When YOU apply for credit and your credit report is pulled an inquiry appears on your credit report. This type of inquiry is called a HARD PULL and can have an adverse affect on your scores. Now this seems harmless but lets take a look at what this does to your credit profile.

A HARD PULL inquiry is reflected on your report for all creditors to see. This is important to understand because the common mistake people make is thinking that just because 1 lender turned you down doesn’t mean someone else won’t approve you. As a result of this damaged thinking you end up with multiple inquiries and NO APPROVAL. The reason is simple. Each creditor can see all the inquiries. They are made aware that you have RECENTLY applied for credit elsewhere and a new credit account may or may nor be opened. The more inquiries that exist, the more open applications exist and therefore the more likely it is that new accounts have been opened. Nobody will approve an application with multiple open inquiries. They can’t be certain that you haven’t extended yourself beyond their qualifying criteria. Regardless what scores and open obligations are reflected by your current report. Open inquiries suggest that your current credit limits, debt ratios etc may change. As a result, the more inquiries you initiate the faster you will get declined. If you have been declined STOP APPLYING! You will not find a lender who isn’t aware of your activity. As far as scores, multiple inquiries for the same item (car or mortgage) in a short period will count as 1 inquiry UNTIL IT IS DECLINED! Then they will count separately and negatively.

Once an application is opened and it DOES NOT result in a new account it will count against your scores. It reflects a declined application which again all lenders will be able to determine by seeing multiple inquiries with no resulting new accounts. It identifies an underlying problem. The more of these inquiries you have the worse your scores will be. I have seen 40 – 50 points commonly from reports that have excess inquiries.

How many are considered acceptable? The exact number is open for debate but it is fairly common knowledge that if you have more than 2 on any bureau in less than 12 months you will see inquiries listed as a negative factor on any credit report score explanation. ONLY 2-3!

There are also common lender violations that can cause consumers issues. For example, when applying for a car loan you would be better served to get a pre-approval from 1 lender before car shopping as most car lots will shop your credit profile with every lender they use. Each one pulls their own report and you end up with a list of inquiries for the 1 item. This is very common and while it is a clear violation it can be very difficult to get the bureaus to do anything about it. We have established methods to deal with this but many consumers just are not aware what the true affect an inquiry has on their credit and they continue to bury themselves. The moral of the story is if you have been turned down determine why and fix it. Applying again will only make matters worse.

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