Not all credit inquiries affect your credit score: You may notice when you pull your credit report there are inquiries on there from a business you are not familiar with. The only inquiry that affects your credit score is the one where you are applying for credit. This is considered a hard pull on your report.
Inquiries that affect your credit score: There is only one type of inquiry that affects your credit score. This type of inquiry is applications for a mortgage, auto loan and other credit, by you authorizing these creditors to access your credit report. This type of inquiry prompted by your own actions ends up on your personal credit report and affects your score.
An inquiry that does not affect your credit score: Checking your own personal credit report or any business that offers goods and services that requests your report. A business that you already have a account with that requests a check. A potential employer that does credit checks. Some of these types of inquiries might show up on your report but do not affect your credit score.
Checking your credit report does not affect your credit score: Checking your credit report on a regular basis to ensure it is accurate and error free is recommended by Fair Isaac the inventor of the FICO Score. Maintaining a error free credit report is part of credit management which will improve your credit rating over time. Ordering your credit report at CreditScoreQuick.com does not hurt your credit score.
How credit inquiries are factored in your Credit Score: There are five types of information used to calculate your credit score. Each category accounts towards a percentage of your score.
Payment History - 35% Amounts Owed - 30% Length of Credit History - 15% Types of Credit in use - 10% New Credit - 10%
Don't let inquires scare you. There is nothing wrong with shopping for a better rate, or better terms on a loan. As you can see in the about chart, payment history is the biggest factor in calculation process of your credit score. The second biggest factor is how much of your approved credit limits are charged up. But of course you don't want to go out and start applying for every credit offer out there either. Be responsible and have a good mix of credit, but stay away from too much credit as well You really on need 3 lines of credit reporting on your credit report.
Example: 1. credit card 2. car note 3. installment loan
This type of credit mix accounts for 10% of your score.
It can seem innocent and responsible enough. You realize you have too much debt so you decide to close a credit card account to insure you spend less money and help boost your score. After the card is closed you check your score 60 days later and you notice you're credit score has actually decreased! In a bout of confusion you call one of the major credit reporting bureaus (Transunion, Experian, or Equifax) and speak to a representative that tells you because you closed your credit card account they viewed the closure as a sign that you couldn't afford to care as much credit as you had available.
While there are a myriad of reasons why your score can be affected from a credit card closure (even if you enact the closing yourself) It is important to realize that there are several steps you can take in order to ensure your credit score continues to remain stable, but closing a card you should realize will never help your score. Why? you may ask. Find out below.
Shutting down credit accounts lowers the total credit available to you and makes any balances you have loom larger in credit score calculations. If you close your oldest accounts, it can actually shorten the length of your reported credit history and make you seem less credit-worthy. However, if you are adamant about closing one or two credit cards take this information into consideration. If you hae decided to close a credit card account, try to close the accounts you have more recently opened. Older accounts weigh more heavily on your credit score since they show your ability to handle credit over a longer period of time. For instance a credit card with 1000 dollars that you consistently pay off every month, or at least make steady payments towards, and have had for an extended period of time, weighs more heavily on your credit score than a card with the same amount of credit that has only been open for a short period of time. Remember, keep your cards from being maxed out and watch out for overextending your credit. If you do not work a stable job extending your credit can be dangerous as you may have to limit your spending and have inactive accounts occur on your report, try to look realistically at your credit situation and work from there
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