“Credit Inquires” Not All Created Equal

“Credit Inquires” Not All Created Equal

A “credit inquiry” is a formal request to review a person’s credit report and stays on ones credit report for 120 days after it was pulled.  A person’s credit score is comprised of five different components, with “new credit” being one of the smallest variables.  New credit accounts for only 10% of a person’s overall credit score.  Searching for new credit is relevant to your credit score because when you make a credit inquiry, it’s a specific request to increase your level of indebtedness. The reasoning behind why inquiries are viewed negatively is that the possibility of taking on additional levels of debt increases the probability of a default.  For each new credit inquiry, it increases the probability that you’re taking on larger amounts of debt, which makes it less likely that you’ll make good on your payments to your creditors.

high credit scoreCredit inquiries come in many varieties.

  1. A credit check for a mortgage loan
  2. A credit check for an auto loan
  3. A credit check for a credit card application
  4. A credit check for a store credit card, or consumer loan

Not surprisingly, each of these four credit check-types receives different treatment by the three credit bureaus; TransUnion, Experian, and Equifax.  For example, a credit card application is weighted “worse” than a mortgage loan and can be more damaging to your total credit score. This is because credit card debts tend to move higher over time, which worsens your overall credit position.  Mortgage debt, by contrast, eventually pays down to $0.00.

The same is true for consumer loans and store credit cards.  These card types are associated with layaway plans and “loans of last resort”; both or which can come with high default rates and can have a damaging effect on your credit score.  Because store credit is considered “bad”, give careful consideration before opening store credit cards.  You may save 20 percent on that purchase by starting up the new account, but you may also inflict immediate damage to your credit score.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+

Posted on March 17, 2014, in Finance and tagged , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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