If you apply for credit from a bank or company that offers credit, an inquiry will be reported on your report. This is referred to as a hard pull credit inquiry. A soft pull inquiry is if your report is pulled by an institution that does not offer credit. Institutions that may pull a soft inquiry include: employers, non-lenders, government agencies, or yourself. Each time your credit report is pulled by a lending institution, it may have a negative impact on your score(s) by as much as 3 to 5 points. Inquiries from lending institutions are listed on the credit report for 2 years.
If you apply for a mortgage, student loan, or auto loan the inquiry should not impact your credit scores for 30 days. In addition, inquiries for mortgages, student loans, or auto loans within a 45-day period are supposed to only count as an individual inquiry. These exceptions allow individuals to shop for the best credit rates and terms without be penalized. Inquiries for all other credit types, such as: department store cards, bank credit cards, gas cards, and personal loan inquiries are counted against your score(s) instantly.
You are entitled to a free credit report annually from all 3 of the main credit agencies (TransUnion, Equifax, and Experian). You can request the free report online from annualcreditreport.com. According to government guidelines, everyone is entitled to one free credit report annually from each of the main credit reporting agencies. After you receive your free copy of your report, review it thoroughly for errors, inaccuracies, unauthorized inquiries, or any debt listed that you have not applied for. Also, verify if there are any authorized user accounts that you no-longer want to be associated with, possibly from an ex-spouse or parent.
The following details the basic calculation for determining a credit score. Ten percent of a credit score is determined by the amount of credit inquiries an individual has applied for in the past 12 months. Fifth-teen percent of a credit score is determined by the length of time or number of payment you have in your credit history. Because of this factor, it is typically beneficial to keep accounts that have been paid as agreed open. If you close an account, the good payment history will no longer be calculated in the credit score. Ten percent of the credit score is determined by the mix of credit that is opened. A consumer’s ability to pay a variety of revolving and installment loans is considered a better risk than a less experienced consumer. Thirty-five percent of the score is determined by payment history. Recent late payments have a greater detrimental impact than aged late payments. The remaining 30% of the score calculation is determined by the percent of credit used by the consumer. It is beneficial to keep balances on revolving accounts below 50 or even 30% of their available balances.