Inquiries
An inquiry is a
request to view your credit file. Inquiries can be made by the
individual, by their creditors, by prospective lenders,
employers, landlords, and even insurance companies. Inquiries
are one of the least understood aspects of a consumer credit
report, yet they can affect your credit score. Inquiries are
divided into two categories: hard inquiries and soft inquiries.
Hard inquiries
occur when you authorize a third party to check your
credit. They frequently represent attempts to obtain additional
debt. Also included are credit checks by leasing companies. These inquiries remain
on your credit profile for 2 years. One inquiry may not
necessarily reduce your credit score, and if it does, it will
likely drop it only up to 5 points. Multiple inquiries in a
short period of time can be viewed as attempts to obtain
substantial debt. Lenders could view this as a sign that you are
having income disruptions or substantial emergency expenses.
Several inquiries back-to-back can have a greater impact on your
credit score. There are a couple of exceptions:
Automobile loan
and home mortgage purchases involve larger amounts of money
where the consumer is smart to shop around for the best
interest rate. Credit bureaus recognize this healthy
behavior and make an allowance for it in the formulas that
calculate your credit scores. Generally speaking, inquiries
made for a home mortgage within a 30-day period are counted
as only one inquiry. Automobile loan inquiries made within a
14-day period are similarly counted as only one inquiry.
Newer versions of FICO based scoring allow for up to 45 days
for both types of loan inquiries to be counted as just one
inquiry. Different bureaus use different versions of the
FICO based scoring model, so this can vary depending on
which credit scoring product is examined.
Soft inquiries
reflect passive credit checks. If you pull your own credit
report, either directly from the credit bureau for a fee or
using the
free
credit report service, this has no impact on your credit
score. It may appear as an "identity" inquiry. Solicitors that
purchase your credit file as part of a list from a credit bureau
will show up as promotional inquiries which are a type of soft
inquiry. Your current lenders that periodically check your
credit to monitor your credit health are also a type of soft
inquiry. These appear as account review inquiries. None of these
inquiries have any impact on your credit score, and they are
grouped separately on your credit report from the hard inquiries
described above.
Credit checks
initiated by employers and landlords also fall under the soft
inquiry category. Even credit checks made as a part of insurance
applications to not affect your FICO scores.
Inquiries are a
record of who is viewing your credit report, and it is limited
only to those who have a permissible purpose to view your file.
Legitimate businesses must register to have access to your
credit report. You can view your own report once you confirm
your identity.
We do not yet have
enough information to report on the impact of inquiries on the
new
VantageScores that will be used by credit bureaus. It is
likely that these guidelines will remain relatively unchanged.
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