Having been the victim of credit fraud recently, I was forced to learn a lot about who manages your credit score and how to protect it during a vulnerable time. Coincidentally, one of our readers sent in these tips to help you understand a little bit more about how credit scores can be negatively affected.
By Stefen Liberti, Realtor, Rodeo Realty
My guess would be about 97% of the country uses some form of credit. Knowing the impact between a hard inquiry and soft inquiry on your credit score, might make you think twice the next time you are standing in line and the cashier asks if you want to save 10% by opening a store credit card.
Most important to know is, every time a credit company, agency or grantor i.e., car dealership, bank, credit card, looks at your credit file, a hard inquiry appears on at least one of your credit bureau reports. These hard inquiries remain on your report for two years! However, they only impact your score for the first year. Some soft inquiries would be Pre-Approved offers, account review inquiries, or employer inquiries. While these inquiries may remain on your report, they should not damage your credit score.
Why Do Inquiries Matter?
If you open or apply for new credit accounts in a short period of time, most scoring models consider that a high risk behavior. Your score will almost always suffer if you apply for too much credit. While many retailers will try and entice you to save 10% on your purchase by applying for their retail credit card, keep in mind that this could impact your credit score negatively. It would be wise to only apply for credit that you need and intend to use prudently.
The Good News Is The Credit Gods Use Something Called…
Smart Rate Shopping:
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. This way you are not penalized for looking for the best rate on one loan. Keep in mind this only accounts for mortgage, automobile, and student loan installment loans; not credit cards or other revolving accounts.
Hope this was helpful.
Stefen Liberti, CalBRE#01894504
O:310.724.7100 | C:310.927.9166 | Stefenl@rodeoRE.com