Credit Inquiries and What They Mean

We get many questions about how many points are affected by a credit inquiry. This is a simple yet difficult question to answer. Let me explain. There are two types of inquiries that a person must take into consideration. Here is a look at both of them:


Soft Inquiries: These do not affect your credit score and thus you don’t have to worry about them. They are reported on your credit report which confuses many people. A soft inquiry, or “soft pull” as we refer to them, are harmless in nature. There are many examples. Here are a few:

1) You have a credit card and you see they have pulled your credit. This is done by your credit card company to see if you have missed paying any of your other financial obligations. If you have been late, this allows them to increase the interest rate on your credit card per your agreement! Very few people notice this when they open a credit line because they don’t read the agreement.

I know what you’re saying: what does a late payment on some other line of credit have to do with my payment history on this credit card? Yes it’s unfair but non-the-less reality.

2) Pulling your free annual credit reports at www.annualcreditreport.com. Again, these don’t affect your score and is something everyone should do once a year. The credit reports are free but you have to pay a fee if you want the score.

3) Lending institutions regularly pull your credit for “pre-approved” offers. You know the main culprits here—usually credit card companies that want your business.

4) A few other examples are when you apply for employment or by landlords for renting or leasing an apartment or a house.

Hard Inquiries: Ok, these are the only ones you have to worry about. When I talk to clients I make it simple by telling them if you apply or initiate an application for a vehicle, credit card, line of credit or a mortgage etc… then it is factored into your credit score.

From my experience many people get into trouble with inquiries when they are making purchases at major department stores or other large businesses. At checkout the clerk tells them they can get “15% off this purchase” if they apply for a credit card or line of credit with that business. Do not do this! Department store cards are not rated the same as major credit cards and the interest rates are usually much higher!

Finally, keep in mind hard inquires stay on your report for two years but are most often only factored into your score if they are within the last six months.



From Thomas McGee

By the way T-minus 12 on the increased MIP. Call me so I can help you avoid it.

You can reach me at 615-777-4663 or via email at george.margrave@migonline.com