Seriously? I am going to write a whole article about credit inquiries ? How boring, right? Well, come on. Do I ever write anything boring or irrelevant?
Although many people will tell you that inquiries have little to nothing to do with your credit score they impact your ability to get credit in other, unforseen ways.
Because I work with many people that are looking at acquiring SBA loans and other loans I can tell you unequivocally that those creditors taking a peak at your credit report can come back to bite you in the butt.
So, what exactly are inquiries? An inquiry is anytime anyone requests access to your credit information for the purposes of making a decision to extend to you credit. Today however, credit reports are also used for employment purposes, criminal proceedings, etc. For our little demo we are going to stick with just the credit issue.
Inquiries account for approximately 15% of your total credit score. Not a huge amount, I know. But, what if I told you that they can still keep you from getting new credit even with scores as high as 780 or higher. What!?! No way!! Way!!
What a lender sees is not your score, which at 780 if that was the only criteria would qualify you for the best rates and usually a pretty substantial credit line. What they see is that you are applying for credit all over the country and what happens if you get approved for all of them at once? Yikes, you are now at a huge debt-to-income ratio.
But….What if you didn’t apply for anything? How could you have inquiries on your report. Here comes the “did you know?” part.
You must place an “opt-out” message on your credit report to keep creditors from accessing it.
WHAT!? You read me right. Much like a “do not call” list you must “opt-out” of receiving pre-approved offers and allowing others to look at your credit report without your permission. This goes back to remembering that your “credit report” is actually and “information report”. The bureaus earn their billions every year buying and selling your personal information, often without your knowledge…that is until you attempt to acquire an SBA loan or other loan that you need.
YOU have the right to access your report anytime you wish and it does not affect your inquiry status. This is known as a “soft pull”. A soft pull will show when a current lender has accessed your account for review, however this does not affect your score nor is this shared with other lenders.
A creditor accessing your information for the purpose of extending credit is known as a “hard pull” and that information is included in your FICO score and listed on your report.
This information is shared with anyone else that does a “hard pull” including the people that are going to make the decision on your SBA loan and your current lenders that are deciding if you should or should not have your limit raised or reduced.
Very few people are aware that you actually have to tell the bureaus “No, don’t share my information”. It seems like common sense, but as we have seen very little having to do with credit and the credit reporting agencies has to do with common sense.
The first step is to go to www.optoutprescreen.com to have electronically remove your report from access. You can even go one step further, and as I find this a great way to help with identity theft, you can request a code from the bureaus that is required for ANY credit inquiry and must be used before your credit can be accessed. This makes a bit more work for the lender, but as we have seen the rules have been skewed toward the lender for a very long time. Now it is about taking control over your credit.
Courtesy of DeAnne West