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Credit Inquiries And You? What's the Gig????

 

Great information for buyers and Sellers alike.  With the current push to sighten standards, itis imperative that consumers get an understanding of it.  Please stop by Laqrry Bettag's blog and leave him a comment

 

Recently I wrote a post about credit scoring entitled What You Need to Know About Credit Scoring.  There were 5 variables that affect the credit score of the borrower.  Needless to say, I really think that while credit inquiries have the lest amount of weight towards your credit, it also happens to be the most misunderstood category. 

The 5 Categories that Specifically Impact your Credit are:

  1. Payment History
  2. Outstanding Credit Balances
  3. Credit History
  4. Type of Credit; and
  5. Inquiries

Like I said, Credit Inquries are the least impactful, but probably the most frequently misunderstood.  So... what's the 101 on credit inquries? 

What's an inquiry? 

Basically, it's when you specifically authorize lenders to look into your credit, specifically from a credit bureau.  IF THE CREDIT INQUIRY WASN'T AUTHORIZED BY YOU, THEN IT'S NOT A HIT AGAINST YOUR SCORE!!!  Know that so that you don't freak out!

Does applying for new credit affect my credit scores? 

The short answer is probably.  The reality is the more you apply for NEW CREDIT, the more likely it is that you need credit to live.  In other words, you're having a hard time making ends meet and, therefore, are applying for new credit to shoulder some of they debts.  If you need credit to live....in general, that ain't a good thing!  Looking for credit too much means that your score is probably gonna drop!

How much will credit inquiries affect my score?

Bottom line...it depends.  So abstract.  So cliche.  Really it will affect each person differently based upon  their own credit history.  For example, don't use credit often and have an inquiry....then don't worry about it.  But if you need a briefcase to hold all of your credit cards together, then this inquiry is more apt to hurt a bit....at least a lot more than for the dude who has perfect or a stellar use of credit.  Here's a good stat for you....Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. I don't know the science of credit scoring, but I do know that there's a reason for everything. 

Are all Credit Inquiries treated Equally? 

Nope, nada, fogettaboutit!  Credit inquiries that go to rate shopping are treated with less scrutiny than those inquiries used to obtaining new credit.  You have a 14 day shopping range to look into credit for a mortgage, or getting a better rate.  CAPECHE?  Bottom line is that for multiple inquries for rate shopping, the scoring ignores mortgage, auto, and student loan inquiries made in the 30 days prior to

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C. Lloyd McKenzie, MBA

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Comment balloon 2 commentsC. Lloyd McKenzie • May 27 2011 09:59PM

Comments

Well done not many in the industry know the correct answer.  I am not trying to premote anything but I did do a video on this and many in the industry have found it helpful you can view it at http://www.thecreditguy.tv/the-impact-of-an-inquiry-on-your-fico-score/

Posted by Dave Sullivan, Michigan Realtor with an investor viewpoint (Real Estate One) almost 7 years ago

Thanks for your Comment Dave

Posted by C. Lloyd McKenzie, Living Albuquerque about 6 years ago

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