Free Instant Credit Reports – Score

Manshu Verma asked:




How does applying for a credit card hurt my credit score?

Every time you apply for a credit card, the credit card company makes an inquiry into your credit report. These are also known as hard pulls. Each of these credit inquiries or hard pulls, take away around 5 points from your credit score.

The rationale behind taking away points from your credit score when you apply for credit, is that, it is harder to control multiple lines of credit when compared to just a few. It also shows a tendency that leans towards getting excessive credit and then getting into a spending spiral, which may become difficult for you to get out of and as a result your chances of default become high.

These inquiries show on your credit report for a period of one to two years, but the dent in score itself will be rectified in about a couple of months, if you do not abuse your newly available credit.

If your credit application gets approved, then your score will rise fairly quickly because the additional line of credit will give you a boost. Along with this, your ‘debt is to available credit’ ratio will also improve and that will help boost your score too.

Be aware of the credit application spiral

The people who are worse hit are the people whose credit application gets rejected. When their application gets rejected, their score goes down. However, since their application has been rejected, they apply again thereby reducing their score further and chances are that they will get rejected once again. This is a vicious circle and if you get into this kind of thing four or five times, then your credit score takes a bigger hit.

So be careful, and next time you are tempted to apply for that store credit card that will give you $10 off on a new shirt, think twice!

Jessie

Tim Gorman asked:




Credit reports can be a bit of a balancing act. On one hand they need you to take out credit so that they (the big three credit reporting agencies) can see that you have a good payment history otherwise they have nothing to base a credit report on. But if you take out too much different credit too quickly then they can see you as being a bad risk for their clients thereby preventing you from obtaining a good credit ranking and possibly favorable credit terms on future purchases.

The trick is if you are looking for credit, whatever it is for, then only apply for the credit that you really want. Don’t apply for many different products so you have a better chance of one of them accepting you. Of course, it can be difficult trying to determine just how long do credit inquiries stay on a credit report and when you can start applying for purchases requiring credit again without it adversely affecting your credit history.

Although you may want to know and may routinely ask yourself “how long do credit inquiries stay on a credit report” for perfectly good reasons it is not always easy to get a straight answer to the question. Credit report companies can be very secretive about exactly how they compile their reports for very good reasons and are unlikely to give you any real help, information or guidance even if you are trying to find out why you have been refused by a merchant for credit.

For a general guideline as to how long do credit inquiries stay on a credit reports, it is usually safe to estimate about 2 years. And if you have been refused credit because of this it is usually a good idea to wait for about 6 additional months before applying again for another loan. Even if you have been applying for credit cards and are now looking for a mortgage the credit card applications will appear on your credit report for the mortgage company.

The best way to make sure that the credit check companies do not see you as having too many applications for loans is to not apply for more than one or two things at a time. That way they may see each application as separate and you will not look like someone who is just applying for a lot of different products or credit at the same time. Of course if you get refused for the loan you are looking for then you are free to always apply to different loan and credit agency or company. Just remember, it is not usually a good idea to apply for too many at the same time. This way your credit is much more likely to be looked at favorably by the credit report company.

Judy