How do credit inquiries affect me?

Every time you apply for credit, your credit report will show an inquiry on your reports. But what does that really mean and how does that inquiry affect you and your credit score?  While a few inquiries are fine, too many can result in lowering your credit score and even a denial of credit!  Creditors may see this as ‘desperate’ and lenders and may hinder your chances of receiving credit/loan. Since lenders don’t like to see too many inquiries on your report, and you want to keep your credit report as clean as possible, it is necessary to understand the different types of inquiries. 

An inquiry made by you:  When you request a copy of your credit report or score, it is considered a ‘soft’ inquiry.  This is not seen by your potential creditors and has no negative affect.

Credit bureau inquiries: The bureau may review your file from time to time.  This is usually to compile mailing lists for its subscribers based on the criteria that the lender specifies.  These internal inquiries do not appear on the copy that goes to your potential lenders and therefore has no negative affect on your credit.

Creditor reviews of your credit:  This is simply a standard review that is done by existing creditors.  It also does not impact your credit.

Credit request inquiries: This occurs when you apply for a credit card or loan and it is reported on your file.  This is only negative if you have too many.  Inquiries remain on your profile for 2 years, too many of this type can be negative and result in denials.  Keep in mind that potential lenders do not have to have your permission to obtain a copy of your credit file.  The law only requires that they reasonably expect to use the information in a credit transaction.  All the company needs is a social security numbers and/or a name and address.  Be careful about giving out personal information and be aware that it may lead to credit report inquiries. 

Collection agency review: Inquiries from a collection agency are very negative. Make sure you inspect these inquiries, because if you have any inquiries from a collection agency that has begun collecting on an expired debt then that does not qualify for a permissible purpose and you may want to pursue getting it removed.   

IRS inquiry:  Inquiries from the IRS usually tell a potential lender that you are either being audited or have a tax lien pending and will have a very negative impact on your report. 

Although inquiries will remain on your file for up to 2 years, those in the last 6 months will count the most heavily against you.  Keep in mind that when applying for loans it is common to have credit inquiries, just know that those inquiries when done appropriately can have the desired effect of credit granting. Being aware and be in the know to keeping your report healthy.

Leslie H. Tayne, founder of The Law Offices of Leslie H. Tayne, P.C., assists consumers and individuals with the resolution of their unsecured debts. The firm's flexible and well established policies and procedures have helped thousands of individuals lead a debt-free life. For more information, call 1-631-470-8204 or visit www.attorney-newyork.com.