Credit Report Inquiries 101

Many of you might be familiar with the term credit inquiry especially if you have availed of promotional offers or were interested in one. Individuals or businesses offering such services or products would usually try to establish your paying capabilities by making an inquiry about your credit. It does not matter whether or not your application or availment was successful; the inquiries will be reported to the credit bureau and will surely show up on your next credit report.

According to the Fair Credit reporting Act, credit inquiries should be authorized before a company should request a copy of your credit report. When you sign an application form, these businesses consider it as permissions for them to ask about your credit history. Although these credit inquiries may not seem harmful to your credit report compared to delinquencies, charge-offs and collection accounts, you should try to avoid them as much as possible.

When you look at your latest credit report, you can not help but notice some entries that are noted as credit inquiries. You should then check what business made the inquiries. If they were made by businesses offering promotional products or services, then you should not worry. These credit inquiries will not cause you to lose points. On the other hand, any credit inquiry that was made because you were applying for an auto loan, credit cards or housing loan will surely cost you a couple of credit points.

You should not worry if you are the one who made the credit check. It is even recommended that you do this on a regular basis to make sure that your credit report is error-free, updated and accurate. In cases where the credit inquiry is unauthorized, you should dispute it immediately so that it will be removed from your report at once.

You might be wondering how credit inquiries affect your credit scores. Basically, your credit score is calculated based on several factors: payment history, amount owed, length of credit history, new credit and types of credit in use. Depending on your credit history, percentages assigned for each factor may vary. Your credit inquiries are included in the “new credit” group and usually accounts for at least 10 percent of your credit score.

These credit inquiries are further divided into sub-categories that factor in the dates and number of times. In the United States, it is common for a person to be considered high credit risk if the credit history is rather short. It is also a belief that people who have more than six credit inquiries on their reports are more likely to declare bankruptcy eight times more.

In order to recover from the negative effects of credit inquiries, you will need to re-establish your financial credibility by paying your bills on time and in full and keeping low balances on your credit cards. You should also make sure that you authorize credit inquiries when needed. If you handle your finances well, you will not have any problems maintaining a high credit score.

Click Here To Find Out How To Delete Credit Inquiries From Your Credit Report