How Do Credit Inquiries Really Affect You

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How Do Credit Inquiries Really Affect You
By Dan Smith

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Response to Reader’s questions

This month I wanted to answer a couple of questions I received from Serenity readers. The first question comes from Matt. Matt wanted to know what the impact was to his credit score by having a mortgage company pull his credit report.

Anytime someone (other than your self) pulls your credit report, it creates and “inquiry” on your report. Credit reporting bureaus keep a running track of how many inquiries you have in the last 90 days. Until recently all inquiries counted the same and had some impact on your score. A couple inquiries would have been normal and therefore had little or no impact. But a large number of inquiries might have had a substantial derogatory effect on your score. Recently the credit bureaus began to “tier” inquiries. They now can determine whether the inquiry comes from a mortgage, an installment (like a car) or a revolving (credit card) credit source.
Revolving credit inquiries have the most impact, because the worry is that you may be borrowing from one credit card to pay another. Here again a couple inquiries in a 90 day period probably won’t impact you much, while several could drop your score significantly. Meanwhile, you can shop for a mortgage with relatively little worry. I recently had a customer with 5 separate mortgage inquiries in the last 2 weeks. His score declined only 1 point as a result.
Keep in mind that there are many factors that go into the calculations run by the computer scoring system at each of the bureaus. How many revolving account, what percent the balance is to the limit, and your payment history are just a few of those factors. So there is no fixed rule regarding point deductions on any single basis. The best rule of thumb is to take a conservative course when it comes to your use of credit and above all make sure you pay on time!

For professional advice on any aspect of home financing, call the expert! Dan Smith can be reached at 303-674-0201. Or visit him on his web site at www.ColoradoHomeLoans.com