February 3, 2009

A common belief of many people is that every time your credit report is reviewed it will be a potential negative factor.  The real truth is only what is known as hard inquiries will count in calculating your credit score.  Furthermore, they could have an effect or they could not have effect.  You need to read more.

What is a Hard Inquiry

This is when a creditor views your credit report upon your request to grant a line of credit.  It solely is for the purpose of granting credit.  What is not a hard inquiry?  These are pretty much anything else.  Such as when you yourself view your credit report, or a potential employer, or an insurance company.  Also, when a creditor views your credit report in the effort to make you an offer.  This is the case when you receive a pre-approved offer in the mail.  All these listed are call Soft Inquiries.

What Effect Do they Really Have?

The effect hard inquiries could have on your credit score depends on several factors

• The number of recently opened account
• The types of accounts you have recently opened
• The number of recent inquiries
• The length of time since your last inquiry

Here is a quote from MyFICO

Inquiries can have a greater impact, however, if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: people with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.

How Long Do Hard Inquiries Stay on Your Credit Report?

They will be there for two years.  If they are still there are two years you can have them removed.

Shopping Around For Credit

If is recognized when buying something large like a house or car, consumers want to shop around a bit.  This way they can get the best deal possible.  If this is the case several lenders are going to review your credit report over a short period of time.  This is actually will not be factored in when considering your hard inquiries.  The credit score formula allows consumers to shop around on these large purchases.

There is an alloted period of time.  This usually recognized as a month.  If the shopping is done in that period of time it will only be considered once.  If it does take longer than this will be a completely separate period.

This is not the case of credit cards.  There is no such applying for credit cards as to shop around.  Each credit card application you fill out will be considered a hard inquiry.

It should be conforting for you to know that you are allowed to shop around on large purchases like auto loans and mortgages.  This way you are a smart consumer and your credit score recognizes it.