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Credit Inquiries -- They Matter!

Main Boise Home Loans

Consumers are bombarded daily with offers of new credit. With 10% of your credit score at stake, taking advantage of these "special offers" does nothing good (or special) for your credit score.

Even with the economy in recession and credit lending and underwriting guidelines tightening, I'm still continually amazed at how often my customers are hit with new credit offers. It is practically impossible for a person to head to the mall or even your own post office mailbox without someone asking you to apply for a new credit account. Depending on your individual circumstances, simply responding to a new credit offer can cost you between 2-20 points from your credit score.

There are two types of credit inquiries...you need to know the difference between the two.
Soft inquiries DO NOT have any affect on your credit score. These are some examples of soft inquiries:
  • Existing creditors reviewing your credit
  • Potential employers checking your credit before hiring you
  • Auto insurance applications
  • Landlords pulling your credit
  • You pulling your own credit
  • Promotional inquiries you receive in the mail as a solicitation to open new credit
Hard inquiries into your credit DO affect your credit score. Hard inquiries include the following:
  • Applying for a mortgage or home equity loan/line of credit
  • Applying for a car loan
  • Applying for a new credit card
  • Student loan applications
  • Applying for instant credit offers at the register while shopping
Why does this matter? You need to look at it from a creditor's perspective. Consumers who have been very actively shopping for credit in the last year may be living beyond their financial means. People who are desperate for financing or new credit or living beyond their means may be at a higher risk of default on their credit accounts.
In my next post, I'll discuss how to improve this part of your credit score, as well as why you ARE NOT penalized for shopping for a car loan or mortgage...as long as you do it correctly!

If you are interested in talking more about this post or a specific credit scoring issue you have or know about, feel free to call us.

Posted by Eric Leigh at 8/12/2009 1:11:00 PM

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