What Credit Inquiries Can Do To Your Credit Score

A credit inquiry essentially is an item that appears on your credit report to show that a business has requested a copy of your report. For the business to make a request for your credit report, there must be a permissible purpose. Various businesses have a permissible purpose for checking your credit report. Potential employers can check to make your credit report you are applying for a position that handles a significant amount of money. Landlords check your credit report to determine if they should extend you a rental. Insurance companies use credit as a factor in determining your risk as a driver. Even utility companies say that you are being extended a month of service and this qualifies as credit.

Anytime you make an application that includes your social security number there is a risk that a credit inquiry will be performed. So what do these inquiries mean for your credit? There are some kinds of inquiries that count toward your credit score and there are some that don't.

The only inquiries that count toward your credit score are those in which you apply for new credit. This includes application for an auto loan, credit card, or mortgage. When you make these kinds of applications, you give the lender the authorization to receive a copy of your credit report.

There are also inquiries that do not count against your credit score. These kinds of inquiries include requests that you make for your own credit report, checks made by businesses that offer goods or services, or inquiries made by a business that you already have credit with. If a potential employer makes an inquiry this does not count toward your credit score.

Many people are confused into thinking that all inquiries that are included in their credit reports count toward their score. This is not true. Only the kinds of inquiries listed above count toward your credit score, even though they are listed on your credit report.

The credit score is calculated using several pieces of information from your credit report. This includes the number of delinquent accounts, the amount owed on these accounts, the length of credit history, the amount of new credit applications, and the types of credit that you are using. Credit inquiries fall under the new credit applications category and only accounts for 10% of the total credit score. This is only a small percentage of the total score. Credit inquiries, when they affect your credit score, can only hurt you a few points.

Inquiries will hurt your credit score in different ways depending on your credit situation, if they even hurt at all. There are some factors that can cause inquiries to hurt your credit score worse than others. For example, if you only have a small number of accounts, a short credit history, or delinquent information on your credit report even just one inquiry can cause your credit score to fall a few points. On the other hand, an inquiry might not have an affect to your credit, if your credit is clean.

When you are applying for a new credit card, you give the creditor permission to check your credit report. If this inquiry has any affect on your credit at all, it will only be small. However, if you apply for several credit cards in a relatively short amount of time, this will cause your credit score to drop a few points or more. When you apply for multiple credit cards, this places multiple inquiries on your credit report. Lenders associate these requests with risk and are less likely to extend you credit.

Unlike credit card inquiries, multiple auto loan or mortgage inquiries within a short period of time do not affect your credit score. The developers of the credit score knew that many people shop around for better rates on car loans and mortgages. For this reason, these inquiries do not take affect until thirty days after the rate shopping period.

There are a lot of factors that come into play when credit inquiries are being made. You can request a copy of your credit report and score prior to shopping for loans and credit cards. This will give you a better idea of your financial situation and can help decrease the number of inquiries that are made.