The Lowdown on Credit Inquiries

The Lay of The Land

There is a considerable lack of understanding with regard to credit inquiries and just exactly how they can affect your credit scores. It is important to know the lay of the land since it is impossible to obtain new credit without these inquiries showing up in your credit reports.

What Effect Do Credit Inquiries Have on Your Credit Score?

Any time you apply for credit the lender will check your credit rating with one or more of the major credit reporting bureaus (Experian, Equifax and Trans Union). This action will then create an entry, know as a credit inquiry, on your credit report. This indicates to any one looking at your credit report that you have applied for credit somewhere. In and of itself this has little impact on your FICO score or whether another lender will approve you for a loan or not. The problem comes when there are numerous inquiries within a given amount of time. If there are an "excessive" amount of inquiries the assumption is made that you have been getting turned down on application after application. This then will adversely affect your score.

The Credit Dilema

The problem is that it is most definately beneficial to shop around, when seking new credit, in order to obtain the best deal. There are a multitude of charges, in addition to interest, that might be charged by a lendor. These can include sign-up fees, annual membership fees, monthly membership fees, late payment fees, overlimit fees and other hidden charges. In many cases the total amount of these miscellaneous fees can be considerably more than the iterest that is payed on the account. These fees will vary greatly from company to company. This make shopping around for the best deal extremly desireable, but at what cost to ones credit score?

The Solution

The key is to make all applications within a very small window in time. All within a week, if possible. Many inquries mand within a short period of time will be treated by the system as one single inquiry for all intents and purposes, and will therfore not negatively impact your FICO score. These exact same inquiries spread out over the course of a few months would show up as multiple inquiries, which is something that you don't want.

Plan Out Your Search For New Credit

Careful planning on your part when seeking new sources of credit will prove to be very benificial to you and your credit score. Research all available information that is provided by potential lenders and make preliminary choices prior to formally applying.