Credit Report Inquiries — Did you know that more than three Hard Inquiries in a two-year period can serve to hurt your credit score?
There are three kinds of Inquires found on your credit profile (report). These are considered labeled as HARD inquiries, Review Inquiries (Soft) and Promotional Inquiries (Soft).
Hard Inquiries are those that are created by your application for credit (e.g., Mortgage, Auto, Credit Card, Store Charge Card….). Sometimes you will find Collection companies listed in this area; these should be in the Review Inquiries area, and need to be disputed in advance of applying for a mortgage.
Online Lenders and Auto Dealerships will shop the financing when you apply for credit with them. I’ve seen as many as seven Hard Inquiries for one transaction when people do this. To avoid this problem I recommend you apply for the financing in advance at a Credit Union to get pre-qualified for the loan. Then once the negotiations are completed you simply write a check.
The impact a few extra inquiries could have could cost you some significant dollars over a relatively short period of time. Based on rates for a mortgage of $200,000 for 30-years, a 690 score versus a 700 score, interest paid to the bank in just the first five-years alone would be $1,238.79 ($247.76 per year). That’s equal to a car payment.
Review Inquiries are considered a Soft inquiry and do not affect your credit score directly. The impact the review may have by the creditor can be a positive or negative one. Your current creditors are seeking to confirm your credit worthiness still meets the guidelines established when they initially extended credit to you. One positive affect could be an increase in your credit limit. The negative impacts this could have is an increase in the interest rates, reduction of the credit limit, and the worst case scenario, they could even close the account.
During the recent financial melt-down it was common to find credit limits being reduced as balances were being paid down. What this did was keep the percent of utilization up so credit scores impacted by high balances stayed low when the goal of the consumer was to pay down the balance on the debt with the expectation that credit scores would go up. Yeah! This was really messed up, huh!
Lastly, another Soft Inquiry is the Promotional one. These inquiries generate all the junk mail offers of credit from car dealers to bank credit cards. To opt out of these offers simply call 1-888‐5opt‐out (567‐8688) or visit optoutprescreen.com.Your Credit Improvement Specialists
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