Can Credit Inquiries Affect Me?
Posted: Jun 04, 2020
In simple terms, credit inquiries are requests made by "legitimate business" in order to check your credit score. Credit inquiries can be classified as either soft inquiries or hard inquiries. Only hard inquiries will have an effect on your FICO score. Soft inquiries are those where your credit is not reviewed by any prospective lender or credit card issuer. Such inquiries are those when you check your own credit or credit checks made by businesses while offering you any service or goods or any other inquiries made by businesses with whom you already have a credit account.
On the other hand hard inquiries are inquiries where a potential lender will review your credit as you have applied for loan with them. For instance, when you are applying for an auto loan, mortgage or credit card, hard inquiries will be done on your credit history. Every credit checks done will be counted as a single credit inquiry. All inquiries made within a 45-day period will be considered as a single credit inquiry. All such inquiries will be recorded by the credit bureau. Depending on the inquiries made, it may or may not affect your FICO score. A FICO score will only takes into account the voluntary inquiries that result from the application you have made for credit. Some of the inquiries that can be factored into your FICO score are-
Will My FICO Scores Fall If I Apply For New Credit?
When you apply for a new credit, your FICO score will not drop much. But if within a short period of time you apply for several credit cards, multiple inquiries will appear on your credit report. Thus, inquiring for new credit can be risky. However, your credit score will not affected by multiple inquiries from auto, mortgage or student loan lenders made within a short period of time. Typically, such inquiries are treated as a single inquiry and will only have little impact on credit scores.
How Much Will Credit Inquiries Affect My Score?
Generally, credit inquiries will have a very small impact on your FICO Scores. The impact will vary from person to person and will be based on your unique credit histories. For instance, one single credit inquiry will take less than five points off from your FICO Scores. Your FICO score can range anywhere between 300 and 850. Thus, inquiries will have a greater impact only if you have a short credit history or a few accounts. Multiple inquiries mean greater risk. People with six or more inquiries on their credit reports are eight times more likely to be declared as bankrupt compared to people with no inquiries on their credit reports. One much more important factor for your credit score is how responsible you are with your bill payments and your overall debt burden.
Are All Credit Inquiries Treated The Same Way?
Not all credit inquiries are treated the same way. Various researches indicate that FICO Scores are more predictive when it involve rate-shopping of loans such as mortgage, student loans, auto loans and so on. FICO Scores ignore such inquiries made within 30 days prior to scoring for such type of loans. So, if you can find a loan within one month such inquiries will never affect your scores. Besides, FICO Scores will look on your credit report for any rate-shopping inquiries that is older than 30 days. Different lender chooses their own version of the FICO scoring formula depending on how it wants the credit reporting agency to calculate your FICO Scores.
Improving Your Scores
Make sure you do rate shopping within a short period of time if you need a loan. FICO scores will distinguish between the search made for a single loan and search made for many new credit lines. If you want to improve your FICO Scores make sure you pay your bills on time, keep your credit card and other revolving credit products balances low and apply for a loan or a new credit card only when needed. Opening new accounts and paying responsibly on time them will raise your FICO Scores over time. Every time you apply for new credit check your credit reports regularly to ensure they are accurate and up-to-date. Your own inquiries will never affect your FICO Scores.www.installmentloanscanada.ca
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