Understanding Credit Score Inquiries

When you are reviewing your credit report, you’ll notice that there is a section that lists the different companies or creditors who have performed an ‘inquiry’ on your credit score and report. There are two different types of inquiries and you need to understand how each affects your consumer credit profile.

Differentiating the Inquiry

When you apply for a line of credit or financing, you have given permission to the creditor to inquire about your credit history from one of the three major consumer reporting agencies. Each time you submit a credit or financing application, the creditor who made the inquiry will appear on your credit report. You might also note that there are companies on the report that you are not familiar with.

The companies you don’t recognize are pulling what is called a ‘soft inquiry’. This is when your credit is pulled just to see where you are credit-wise since many of the companies will use this information to solicit new lines of credit to you such as ‘pre-approved’ applications. Soft inquiries also come from your existing creditors who perform regular checks to ensure no financial issues are present. Soft inquiries on your credit report are not supposed to count against you or affect your credit score.

‘Hard inquiries’ are those performed when you actually do fill out and submit an application for credit. It is important to realize that too many hard inquiries can lower your score and make you appear a risk to new creditors reviewing your credit profile. The only time hard inquiries won’t hurt is when you are shopping for new credit or loans within a 30 day time period.

Since consumers should be seeking the best terms and conditions for new loans and credit, these inquiries are ignored. This includes mortgage loans, auto loans, and student loans. Any inquiry completed within a 14 day time period count as only one inquiry on your credit report. This action was taken when consumers who were shopping around to make better lending and credit decisions discovered that by being savvy consumers they were actually harming their own score.

Minimizing Inquiries

While you don’t have control over the soft inquiries on your report, you do have a say in how many hard inquiries are performed. Applying for too much credit at one time makes you appear to other creditors and lenders as irresponsible with your credit management. There is no set number of how many inquiries it takes to start dropping your credit score but a good rule of thumb is to manage the credit you have and only apply for new credit when necessary.

It is always best to order your free annual copy of your credit report and review the information for accuracy. You may need to check in with your report more regularly than once a year but you should at least do an annual review to ensure the correct information is being reported. Too often consumers suffer much lower credit scores than necessary simply because information is being reported incorrectly.

Any inaccurate information should be disputed directly with the consumer credit reporting bureau which has a duty to investigate the information and make relevant changes if necessary within a 30 day time period. Correcting incorrect credit report information can boost a consumer credit score considerably in an effort to repair credit scores.

Credit reports are much easier to understand these days. It is smart to check in regularly and review what creditors are saying about your credit management skills. Without knowing where you stand credit-wise, you can actually damage your reputation by applying for a new loan or line of credit. Review all of the information contained in your credit report so you can make your credit benefit your financial reputation.

Applying For a Mortgage – The Significance of the Credit Score

A credit score is a numerical representation of one’s likelihood or capacity to pay back a loan or money borrowed. It is based primarily on previous payment history, time length of credit history, the frequency of applications for credit, the mix of credit types, and of course one’s current debts.

It is also oftentimes called the FICO score, which is the acronym of Fair Isaacs Corporation, the developer of the software used in calculating credit scores. When applying for a mortgage, this will play a huge part in the application process for a mortgage.

When applying for mortgage financing, it is best to be prepared by knowing what one’s credit score is. At least six months before applying, obtain your credit reports and score from Equifax, Experian, and TransUnion to check for your current credit status as well as to ensure that there are no errors resulting in a low score.

The importance of one’s credit score when applying for a mortgage cannot be overstated. Banks and other lending institutions will look at this score when they review your application. Many times people will make sure they get their score up before applying for financing for a major purchase like a house or a car.

Usually, credit scores of 760 and above are considered the top tier scores. Having high scores mean that lenders will be more willing to give you better deals such as lower interest rates and more choices on your loan, which will translate to bigger savings down the road.

A credit score of 620 and lower falls into the subprime category. The effect of this is that, in general, one will expect to get higher interest rates and lesser choices on the type of loans. This can severely affect your chances of being able to afford the home you so desperately desire.

Having a low credit score does not automatically mean that one is disqualified from getting mortgage financing. Some lenders will look into other factors aside from the score like salary and savings, and will also request for more documents such as bank statements, on top of the higher interest rates.

While it is indeed very important, it doesn’t mean that one’s credit score is set in stone. It is possible to improve it by measures such as paying off credit lines that has the highest interest rates or credit card balances that are closest to their credit limits.

The Fastest Way to Improve Your Credit Score

Having an outstanding credit rating can open many doors to you, due to that it plays an important role in your financial situation, if you have ever had a credit history. Many do not pay attention to the high importance of this score.

Any credit rating, good or bad, is easily worsened by small flaws and mistakes we commonly make, such as missing a payment or pay it late, unemployment periods, bankruptcy, or close accounts at 0. However, it is important that these issues are fixed for a better future. By this, you will not only increase your score, but will also have benefits, such as lower interest rates. Improving your credit score is easy and simple, you just have to be aware of certain things.

The first thing you should realize in order to improve your credit score is being aware of the need to know your score, thus, check it regularly. Make sure you go over possible mistakes that report in your history. Finding any irregularity should make you report it immediately. Secondly, you should understand where your credit score comes from. There are various sites in the internet that will help you understand better what a credit score is. Paying your bills and debts on time will also improve your credit score. Take into consideration that this will not only help your score, but will also help your image as well. In addition, knowing your credits, being aware of them, and being able to control them are things that will also improve your score.

Like the mentioned, there are many other ways that will help you improve your credit immediately. Remember that even if it is easier to worsen your credit, maintaining a high score is worth the dedication.