Reading your credit report Part 7: Inquiries

Credit Inquiries

The final part is inquiries. That’s a list of everyone who asked to see your credit report. Any time anyone gets into the report, it’ll post an inquiry.  That means if you try to apply for a credit card, it’s listed as an inquiry.  Have you been shopping for a car?  Every time a dealership runs a credit report, it shows.  If you call the credit bureau and ask for a copy, it will be on there. It’s a very detailed entry record. Generally, this is great for the consumer.

Inquiries are divided into two sections. “Hard” inquiries are ones you initiate by filling out a credit application for a line of credit or to borrow money. Hard inquiries can also come from utility companies, mobile phone providers, insurance companies, apartment complexes and even employers. “Soft” inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account. Credit monitoring companies would also fall into the category of Soft inquiries.

You may have heard that many inquiries can have a negative impact on your credit score, but you’re probably OK. Many inquiries are ignored by the FICO scoring models, this is called a shopping window.

For instance, most models have a buffer period that theoretically ignores inquiries within 30 to 45 days of getting a mortgage or a car loan. However, there are times if the inquiry is coded to the credit report incorrectly, some inquiries could fall outside of the shopping window and be counted individually rather than being grouped. This happens most often in the Auto industry where inquiries are coded as financial inquires or bank loans rather than Auto loans. Bank loans do not have a shopping window.

Having a lot of credit inquiries on your account could also show potential creditors that you are trying to live your life on credit which means you might not have the means to pay back the debt.  This is especially true if you’ve been applying for a lot of credit cards.  And there are always many opportunities to apply for a credit card.


Credit Card Offers

Of course, you know about all the offers that come in the mail.  They usually read “You’ve Been Approved!” as an enticement for filling out the application.  This is not always true with pre-approval offers, so proceed carefully.

Watch out, too, when you are shopping at your favorite department stores.  They also have store credit cards and may offer you a percentage off your purchase in exchange for a credit application.  In general, this is not a bad idea – which will be talked about a little later in rebuilding your credit – because store credit cards are great when helping rebuilding your credit.

The bottom line is that if you don’t need another credit card, don’t apply for one.  It’s always good to have one on hand for emergencies, but having five or six can just be a temptation to spend beyond your means. We recommend having three open and active credit cards. We can talk more about that when talking about revolving accounts and their importance.

There may also be a section on your credit report that lists creditor information.  The creditor contact section lists the name and contact information for each creditor that appears on your credit report. This can also include the contact information for creditors that have made inquiries.

Each creditor’s address is listed to the right of the creditor’s name. When available, a phone number is listed for the creditor. Creditors without listed numbers should be contacted by mail.

So, that’s the first step – getting your credit report and going over it with a fine-tooth comb.  But where’s that magic number – your credit score?  Stay tuned for our next series on the credit score itself and where it comes from.


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