Created on 12/20/2016 by Thomas (TJ) Underwood of Realty 1 strategic Advisors
Learn how inquiries can negatively affect your credit and credit score...
Did you know that the number of Inquiries on your credit report is a key factor in maintaining and improving your credit?
It is important that you keep inquiries (hard pull of your credit file) at a minimum if you are in the process of maintaining or improving your credit.
In this discussion of the 5 factors that affect your credit we will discuss the importance of keeping inquiries by your creditors (hard pull) at a minimum.
It is important that you realize that you can pull your credit and credit score and that is called a soft pull and it will have no or very little effect on your credit score.
The same is basically true of your current creditor(s) that you may have.
However, when you apply for new credit or a new loan many creditors or "potential creditors" will do a hard pull and the effect of that would normally cause your credit score to drop some.
If several creditors or potential creditors pull your credit within a certain period of time your credit could be affected even more.
Remember the five credit factors include:
Negative Information (you must do all that you can to keep it off of your credit report—you tell me all about "Payment History and the importance of keeping Negative Info out of your credit file" after reading this article—LOL—no seriously) also known as your Payment History— comprises 35% or is
1st in importance of the credit factors
Utilization or how you Use Your Credit (do your best to keep your account balances low or at zero)—30% or
2nd in importance of the credit factors
Time Factor or how long you Keep Your Accounts Open (be sure to keep older accounts with a positive payment history open)—15% or
3rd in importance of the credit factors
Type of Credit or your Credit Mix—which we discussed in a previous article (you tell me all about "the types of credit"—LOL—no seriously)—10% or
4th in importance of the credit factors
Inquiries or how many creditors do a Hard Pull of your credit file (keep your hard inquiries to a minimum if you are trying to improve your credit in a timely manner—you tell me all about "the importance of inquiries"—LOL—no seriously)—also 10% or
The same level of importance as the "type of credit" mentioned above
100%—get the picture…
It is important that you do not apply for too much credit (numerous inquiries) if you are in the process of improving your credit and credit score.
Even though your utilization rate may fall, the mere fact that you are applying for new credit may offset that fact and pull your score down depending on a number of factors including the "type" of credit that you are applying for and ultimately receive.
Be sure to keep "inquiries" by those new creditors to a minimum or not at all if you desire to improve your credit score more efficiently.
If applying for similar credit from a number of creditors do your credit pull within a tight window (same day) if possible.
By applying for new credit you also affect the "age" or "time length" of your accounts and that too will pull your score down.
Your effective application of this factor (keeping inquiries to a minimum if you are trying to build and use your credit in the near future) along with the other 4 credit factors listed above will put you on path to getting you where you need to be as you pursue your credit and financial goals.
By mastering the 5 credit factors you now understand your credit roles!
You have now passed the test...
Wishing you all the best in your credit and financial future...