Checking One’s Financial Status
A credit inquiry is a direct result of a business or other authorized persons checking your credit report. If you apply for a loan, credit card, or other financial instrument you may be required to provide your social security number etc. for credit purposes. Credit inquiries will also be assessed when you have telephone and cable services that you pay monthly, not to mention applications for apartment rentals. When you provide the business with the requested personal information they will then use this as permission to obtain a copy of your personal credit report. They will use the information on your credit report to see if your outstanding debts out way your assets and income, and in turn will let them know how much risk will be associated with lending you the specified amount.
When lenders check your credit report, after gaining your permission, this is known as a “hard” credit inquiry. That is because they are requesting a hard or actual copy of the complete report for viewing. These “hard” inquiries are the ones that directly affect your credit score. When a business or other authorized person looks at your credit report they are not only checking your debt to income, but they are also checking for other items such as how many other inquiries you have listed. When creditors see several other “hard” credit inquiries they assume that you have already received credit lines from these companies already. This appears to them that you have too much credit debt and will be a high risk investment.
The companies will be less likely to extend the product or service to you if they feel like you will not be able to repay your existing obligations. When businesses and lenders, who already have existing credit lines or services established with you, make simple inquiries about your credit report solely for promotional purposes this is known as “soft” credit inquiries. “Soft” inquiries are for sales reasons and are used to verify address information and/or financial needs, in which existing lenders and businesses can use to recommend additional products and services that they offer. “Soft” inquiries do not directly affect your credit score and are not considered when applying on new applications.
When it comes down to the credit inquiries that do directly affect your credit report, these can have a tremendous impact on how high or low your credit score will appear. When multiple lines of credit are opened within a short period of time lenders may consider them a high risk factor. They are less likely to extend a line of credit to someone who has multiple lines of credit and several extra credit inquiries. Up to ten percent of your credit score is based on credit inquiries, but some may only see up to five points at the most in inquiry decreases.
Credit inquiries can stay on your report for approximately two years before they are erased. If you do not want to wait that long for them to disappear there are other measures that you can take. Try filing a claim with any of the credit bureaus if you see an inquiry that you did not consent. These will be reviewed and taken care of immediately. If however you did consent to these inquiries then you have the option to write a letter to the businesses and ask them to please remove their credit requests. Some companies may or may not be willing to remove their credit requests, and in such cases you can dispute that the signed applications were not clearly stated and you were unable to interpret the true meaning.
Use caution when applying for credit cards or other services, because those credit inquiries will add up over time. By keeping inquiries down to a minimum, along with constant and on time repayments, you will have a very healthy credit score that will look promising to future lenders. Keep in mind to check your credit report yearly to view all credit inquiries etc. that are made to your report, and if any look suspicious then report them as soon as possible.