Saturday, October 3, 2009

Demystifying Credit Scores: Pt 2 How Inquiries Affect Your Credit Score

This is the second post in a series of five mini posts of our series on Demystifying Credit Scores.
Please be sure and read through the other posts, too.


Continuing our series of posts on "Demystifying Credit Scores", this posts explains how credit inquiries affect your credit score.

There is a lot of misinformation floating around regarding how inquiries affect your credit report, and I finally feel like I have a reliable answer!!

There are two kinds of inquiries: Soft and Hard

Soft inquiries are done by insurance purposes, current creditors, and employers. These do not have a negative impact on your credit rating.

Hard inquiries are inquiries run whenever you’ve applied to borrow money from a creditor (credit cards, personal loans, mortgages, car loans, student loans, etc.). When you have a “hard” inquiry, it immediately deducts points from your credit score for each "unique" inquiry. Generally, the point loss is somewhere between 3 and 7 points, and you don’t get those points back for one year.

However, if you have multiple inquiries from a similar type of creditor – like mortgage loan inquiries from multiple companies, the scoring models do allow you to “shop around” without further deducting points. Experian allows you 14 days, TransUnion and Equifax permit 45 days.
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