How Credit Inquiries Affect Your Rating

Every time you apply for a line of credit, an "inquiry" is placed to a credit bureau. These inquiries are recorded on your credit report. It may seem like there's no harm in applying for credit, but sometimes that's not the case.

Credit inquiries can be looked at as unfavorable by lenders. If you have too many of the wrong kind, you may be denied credit. There are several different kinds of inquiries. Lenders don't weigh them equally.

You, your existing creditors, and credit bureaus themselves can make inquiries onto your report. These inquiries will not affect your credit negatively. Potential lenders will not weigh them when deciding to extend a line of credit to you.

This means that you can check your credit report as often as you like with no negative effects. In fact, it's a good idea to check it at least 2 times a year.

On the other hand, it can be seen as negative to have many inquiries by potential lenders. A lender may see you as a risk if you're applying for many credit lines with different companies.

If you're trying to settle a debt, a mortgage or auto loan inquiry can keep you from being able to negotiate for a good settlement. If you have debts to settle, make sure you settle them before applying for a home or auto loan.

It may also be unfavorable to have inquiries from the IRS or any company that has a judgment against you. This type of credit inquiry can make you appear high-risk to potential lenders.

In most cases you have to give written permission for an agency to inquire about your credit information. It. s a good idea to check your credit report occasionally to monitor the inquiries.

If you feel like there are inquiries that shouldn't be on your report, you can dispute them. Your credit report will come with an address that you can write to report anything that you think is unauthorized.

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About the author:

Michael Torrance is a financial consultant with First American Debt Consolidation and Loans, a company specializing in debt consolidation loan alternatives through consumer credit counseling.