Recently we’ve been discussing credit scores, thanks to our Community Partner Alexandra Erlich of Riverstone Law. There are so many questions surrounding credit and credit scores that we decided to answer the most common ones over the last few weeks. This week, we will be discussing credit inquiries, which is something that we get asked about frequently. We will be looking at the different types of inquiries and how those inquiries affect your overall score.
A credit inquiry can also be referred to as a pull on your credit. There are two types of credit inquiries or pulls:
Soft Inquiry: A soft inquiry does not show up on your credit report and is usually just a request for information on your overall creditworthiness. For example, those notifications that you receive that say “You’ve been approved, call now to accept!!” They have done a soft pull on your credit. They can do this without your permission, and it doesn’t appear on your credit report. Now, once you call and accept the offer, they then do a hard pull to see everything. Soft pulls on your credit also include personal and consumer pulls when you are looking at your statements or scores online. Those do not count against you.
Hard Inquiry: This type of inquiry is when a potential lender is reviewing your credit after you’ve applied for credit through them. These occur when you apply for a mortgage, or apply for an auto loan or a credit card. These hard pulls count in the 10% category of inquiries and will count for anywhere between 1 and 5 points. Hard pulls stay on your credit score for around 18 months.
There are some exceptions to potential penalties for “hard inquiries.” For example, if you were shopping around for an auto loan, you might go to multiple dealerships, and each of them performed a credit inquiry, they would all count as “one.” Having your credit checked by one auto dealer and having it checked by six different auto dealers all count the same as far as your credit score is concerned. The scoring algorithms say that all inquiries in a 30 day period will count as one, as long as they are used for a single purpose, like shopping for an auto loan. That is a little different for mortgages, as you typically won’t be shopping around much for a mortgage lender (prices aren’t going to vary that much). So each pull on your credit for purposes of mortgages will count anywhere from 1 to 5 points.
If you have multiple credit inquiries on your account, such as six or more inquiries at a given time, lenders are less likely to lend you the money. In fact, people who have more than 6 inquiries are more likely to declare bankruptcy than those with fewer inquiries. So it is important to keep track of the inquiries on your account.
If you have any questions regarding inquiries or credit scores in general, please feel free to reach out to Alexandra Erlich from Riverstone Law or Cheri Landin at The Mortgage Co for more information.
About Alexandra Erlich
Through all of my years in the banking and finance sectors I have found that there is one arena where skilled, knowledgeable and service minded professionals were few and far between: Credit Consultation and Restoration. After personally going through credit highs and lows over the years and working with countless companies I finally found the one that actually delivered on every commitment. Riverstone Law with the wealth of expertise and service impressed me to such a level that I sought employment with the company. I am so grateful to finally be in a position with a company that I believe in wholeheartedly and offering a service that I know without a shadow of a doubt everyone can benefit from. Every day excites me as I share my knowledge of the FICO and credit systems with all of the colleagues, professionals and their networks I have had the pleasure of working with for numerous years, now as I watch their pipelines, businesses, and incomes grow I am confident I have found my calling.
Cheri Landin
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