There is a lot of conflicting and misleading information out there concerning credit inquiries and their relation to your credit score. Some people aren’t even sure what exactly a credit inquiry is. Essentially, a credit inquiry is when you, an employer, or someone else asks to receive a copy of your credit report. This inquiry shows up on your credit report, and is just one of the many entries that shows up on that report. These inquiries happen when you apply for new credit, and they could be from companies you both know and don’t know about. You’ve probably heard that inquiring about your credit can actually lower that score. Only part of this is true, and there are two different types of inquiries that you should know about. Credit score monitoring services will help you.
The first sort of credit inquiry is when you apply for credit. These inquiries, called “hard inquiries,” are the ones that can negatively affect your credit score. This means that when you apply for a car loan, a mortgage, and several other things. The other inquiries, or “soft inquiries,” are from when you ask for a credit report, when mass inquiries are made in order to send pre-approved credit cards, by potential employers, or by anyone else looking to do business with you. Basically, a good thing to remember is that hard inquiries are those that you intentionally submit in the hopes of getting another line of credit, while soft inquiries generally take place without your knowledge, save for personal requests for a credit report.
While hard inquiries do affect your credit score, it’s not that much, depending on your situation. The amount of inquiries on your credit report come out to equal around 10% of your overall score. The type, frequency, and purpose of the inquiries also plays into your credit score. Think of it this way: if someone is constantly applying for credit cards or other lines of credit in a short period of time, it is most likely that they will have more debt on their hands or are in a rough financial situation. Also, it depends how long your credit history is. If you have a long history with a certain number of inquiries, a shorter history with the same amount of inquiries would result in a lower credit score. Additionally, the credit inquiries made the most recently have the most effect on your credit score.
These inquiries stay on your credit report for two years, and during that time, anyone who is assessing your credit score, such as lenders or creditors, can see them. However, only the inquiries that you made within the past year will affect your score.
If you are looking around for the best deal on a mortgage or car loan, you might be a little concerned about the amount of inquiries on your credit report. However, all inquiries made within a 45-day time period only count as one inquiry, so it’s best to get your shopping done as efficiently and quickly as possible. What you need is credit score monitoring software such as Equifax.