Credit Reports: Inquiries – A Silent Killer

People are typically aware that delinquency and having a high level of debt can smash a credit report to pieces.  However, what many people do not realize is that multiple inquiries on credit reports can also have a detrimental affect.  Under certain circumstances, the rating may drop by a small amount each time creditors or financiers pull up a copy of your credit report.  While shopping for credit cards or vehicles, for example, this is a common occurrence, as credit reports will be requested before anyone will even begin to see if a buyer is qualified.

There are several types of inquiries, and are recorded every time information is requested from a person’s credit file by a company or creditor.  Some inquiries, known as “soft inquiries”,  have no effect on the credit rating of the person being inquired about.  Pre-screening by a credit bureau before sending the information to the credit-card-issuing bank falls also under these so-called “soft inquiries”.  Creditors may check their customers credit files from time to time with no effect on the rating.  Luckily, people can also check their own credit rating without it having an adverse affect.

Other inquiries which can have an effect on the rating are known as “hard inquiries”, and are typically made by lenders when people search for credit or loans.  Once they have been granted permissible purpose, lenders can “pull” the consumer’s ratings, for the purpose of determining whether the consumer qualifies for credit.  Hard inquiries directly affect the rating on a consumer’s file, and minimizing them can help protect a person’s rating.  Some lenders perceive multiple hard inquiries over a short time as a sign of financial hard times, and may not want to extend credit to a “poor credit risk”.

Credit reports should be monitored well, and caution taken to avoid being adversely affected by these hits.  Any requests for a credit file should be weighed heavily, and taken with more serious consideration than many give it.

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Credit Reports: Boosters

There are several things that can make a credit report look better than others.  For the most part, maintaining a clean record can keep the credit file looking its best.  Things such as maintaining a debt-to-income percentage of less than fifteen percent, keeping the same house and car for more than two years in a stretch, keeping credit balances low, and maintaining a decent amount of available credit are ways to build and maintain healthy credit reports.

Excluding a mortgage, creditors and financiers will look at debt of over fifteen percent of income as a sign of a person living beyond their means, leaving a ‘bad mark’ on record.  In contrast, keeping the debt level below that mark will encourage lenders to look more fondly on loaning funds out.

Maintaining longevity with a home and car loan, along with no delinquent payments, looks great on a credit file.  When a creditor pulls up a file, they have the capability to see not only how much debt a person has, but how long it’s been on the file, and how much has been paid.  Signs of stability and discipline always look better than changing the debt often.

One of the most obvious but also the most neglected ways of keeping credit files in check is paying off loans and credit card balances.  This is one of the basics of credit that look great when creditors look up an account.  A common misconception, and at times a costly error, is that of closing credit accounts in an effort to reduce the perceived debt, thereby improving credit score.  Unfortunately this can in fact have a detrimental effect on credit reports because it decreases the total available credit.  In terms of good credit reports, the more available credit there is on file, the better.

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US Credit Bureau Phone Numbers

US Credit Bureau Phone Numbers for the 3 major Credit Reporting Agencies in the United States:

P.O. Box 740241
Atlanta, GA 30374

P.O. Box 2002
Allen, TX 75013
1 888 397 3742

P.O. Box 1000
Chester, PA 19022

What is a FICO Score?

What is a FICO Score?

A FICO score is a credit score created by Fair Isaac Corporation. The FICO score is the most well known credit score in the United States, and is is used by all three of the major credit bureau reporting agencies (Equifax, Transunion and Experian). A high FICO score (720) indicates better credit, and a FICO score below 600 is considered poor. The most important factor in determining a FICO score is making past payments on time. The percentage of credit limit used is another important element in the FICO score models, with a penalty for using too much of available credit. These two factors are given a total weight of around two thirds in calculating the typical individual’s FICO score. Other major FICO score variables include length of credit history and types of credit used. Bankruptcy, foreclosure, court judgments, and tax leins reduce FICO scores dramatically, especially they are recent events.

About Fair Isaac Corporation:

A pioneer credit score company, FICO was founded in 1956 as Fair, Isaac and Company by engineer Bill Fair and mathematician Earl Isaac. FICO was first headquartered in San Rafael, CA, United States. Selling its first credit scoring system two years after the company’s creation, sales of similar systems soon followed and in 1987 FICO went public. That year also saw the introduction of the first general-purpose FICO score.