Why Too Many Inquiries into Your Credit Report Can Hurt You?
We should always try to maintain a healthy credit report in order to secure our financial future. Credit report determines our eligibility to get loans and jobs. Hence, it is essential that we know the factors which influence our credit report.
You must have heard that too many inquiries can hurt your credit score. Have you ever tried to know why financial advisers ask people to refrain from such activities? Let us delve deeper into this matter so that next time when you apply for a credit card or a loan, you take appropriate steps.
Types of inquiries
It is essential to mention in the beginning that inquiries are of two types – hard and soft. Hard inquiries affect the credit score but soft inquiries do not and so you must be well aware of the difference between the two.
Soft inquiries
A soft inquiry involves looking into credit without your knowledge. Generally, background screening done by employers and creditors or advertisers who are interested in making any loan offers to you or are interested in having you try their product (without you requesting for it), fall under this category. This inquiry can be performed without your permission. In fact, when you check your own credit, it is also a soft inquiry and it does not harm your credit.
Hard inquiries
Hard inquiries are performed to determine your credit worthiness and too many hard inquiries can actually harm your credit score. When you apply for a credit card or a loan, the companies minutely look into your credit report. This is a hard inquiry which requires your permission and your social security number also needs to be provided. You should refrain yourself from entertaining too many hard inquiries.
Fortunately you have control over these type of inquires as companies need to have your permission to conduct a hard inquiry.
How to shop around and still avoid hurting your credit score?
Financial experts have worked on the issues related to hard inquiries and suggested several ways to negate their damaging effects. Normally inquires related to similar loans made within a period of 14 days are considered as a single inquiry. So, if you are out on a rate shopping, make it a point to complete them within a month. In this way, you will not hurt your credit rating.
Credit report contains information that can go against your financial interest. So, it is vital that you take precautions regarding what information comes up in it. It pays to know more about hard and soft inquiries and practice precaution when applying for loans or shopping for mortgages.
