Everything You Should Know About Credit Inquiries

Credit Inquiries: Everything You've Ever Wanted to Know

What is a credit inquiry and do they hurt my credit scores? And what’s this rumor I keep hearing about how FICO (FICO) scores are protected from multiple inquiries in a short period of time?

First things first, let’s define “credit inquiry.” A credit inquiry is simply a record of someone gaining access to your credit reports. The inquiry record has two meaningful components, the date of the access and the name of the party doing the accessing. The credit reporting agencies maintain a record of inquiries from anywhere between six months and 24 months, depending on the inquiry type.

All inquiries fall neatly into two categories, hard and soft. Hard inquiries are usually generated when you apply for something (there are exceptions though). Soft inquiries are generated when access to your credit report is granted for a reason other than the underwriting of an application. Below are just a few examples of each type.

Hard Inquiries:

Mortgage applications

Auto loan applications

Credit card applications

Personal loan applications

Collection agency skip-tracing

Soft Inquiries:

Consumers pulling their own credit files

Lenders sending you a pre-approved credit offer in the mail

Lenders with whom you have an existing relationship viewing your credit periodically

Hard inquiries are what we in the credit-scoring world refer to as “fair game,” meaning they are viewed and considered by credit scoring models, lenders and anyone else who has access to your credit reports. These are the types of inquiries that CAN lower your scores. Notice the obnoxious bolding of the word “CAN.” Hard inquiries don’t always lower your scores but they certainly can.

Soft inquires are off limits. They’re off limits to credit scoring models and off limits to lenders. In fact, they aren’t shown to anyone other than you when you ask for a copy of your own credit reports. Most credit reports are polluted with soft inquiries so thankfully they have no impact to your scores, at all.

Just like everything else on your credit reports, there is no fixed value per inquiry. So, when you read things like “My score went down 12 points because of an inquiry” or “Inquiries are worth 6 points each” you can ignore what you’ve read because it’s incorrect. The number of points you earn in the “Inquiry” category is based on how many hard ones you have on your file over the previous 12 months. That’s right, hard inquiries over 12 months old don’t have any impact on your FICO scores despite the fact that they’ll be on your files for another 12 months.

Now, let’s address the method which FICO uses to count inquiries. This is complicated, which is why there’s so much incorrect information on the subject floating around in the web world. Remember, we’re just talking about hard inquires at this point and only those that have occurred in the previous 12 months.

30-day “Safe Harbor” period
Mortgage, Auto and Student loan related inquiries that are less than 30 days old have no impact, at all, on your FICO scores. That’s why the date of the inquiry and the party accessing your reports is so important, because that’s how the inquiry is dated and categorized. So, if you want to split hairs, these types of inquiries only count for a maximum of 11 months because they’re ignored for their first 30 days on file and then only counted while they’re up to one year old.

45-day “Rate Shopping Allowance”
Over a decade ago FICO changed how they treated multiple inquiries caused by lenders in the mortgage and auto lending industries. And more recently, they’ve changed how they treated student loan inquires. The issue was how to not penalize consumers who were interest-rate shopping and, thus, filling their credit reports with multiple inquires in a very short period of time. The 45-day logic considers inquiries from mortgage, auto and student loan lenders, which occur within 45 days of each other as 1 inquiry. So, you can apply for 15 auto loans in as long as the lenders pull your reports within a 45-day period the 15 inquiries will be counted by the FICO score as only one search for credit. The idea, which makes perfect sense, is that the shopper is really only looking for one loan, not 15. There was a time when the 45 day period was only 14 days, but that was in much older versions of the scoring software.

You’ve probably noticed that credit cards, retail store cards and gasoline cards are not protected. That’s because people don’t generally shop for plastic like they’d shop for an auto loan. You don’t apply for credit cards with Capital One (COF), Discover (DFS), American Express (AXP), Bank of America (BAC) and Wells Fargo (WFC) and then choose whichever issuer gave you the best deal. What you’ve actually done is to open new cards with Capital One, Discover, American Express, Bank of America and Wells Fargo and opening so many accounts in a such a small period of time is indicative of elevated credit risk, so no dice my friends.

The same is true for retail store cards. You don’t rate shop at Macy’s stores at every mall in your city. The rate you get is going to be the same regardless of which store you apply at. This is very troubling news for the people who use their credit reports as “15% off” coupons at the mall and apply for instant credit at the register just to save a few bucks. Each of those is really an application for a new store credit card, and those inquiries can sting.

There are also some notable exceptions to the hard inquiry rule (that they are always seen and considered). For example, employment inquires do not count in your credit scores. Neither are insurance or utility inquiries counted in your scores. As you can imagine, it’s hard to argue that applying for a job, insurance (which is generally a legal or lender requirement) or utilities leads to a debt obligation and you certainly don’t want to penalize people for applying for these basic needs.

There you have it. Everything you ever wanted to know about inquiries but were too afraid to ask. If you have any questions about credit or credit reports message or email me at sales@disputedelegation.com. Better yet, you can contact me directly at 727-835-8416. 

#credit #inquiries #CreditRepairVIP

Repairing Your Credit Yourself VS Having a Professional Do It

You have two options when it comes to repairing or restoring your credit. First, you have the option of repairing your credit by yourself. This is a good option for someone who has the time and commitment for do-it-yourself credit repair. It does take time, and you have to know what you are doing.

Fixing Your Credit Yourself

You should consider the following questions before jumping into cleaning up your credit by yourself:

1. Am I prepared to do a lot of research and learn the methods of credit repair?
2.Do I have the time and commitment to follow this to completion?
3.Do I feel comfortable negotiating with collectors?

If you want to jump into do-it-yourself credit repair, I recommend you give an expert a call first to see if it really is worth the time. This is a good place to start if you decide to make the leap and clean your own credit report.

Have a Professional Clean Up My Credit

Your other option of course is to let a professional credit repair company handle repairing your credit. This option is best for people who just want to be done with the whole thing.

There is usually a fee for this, but it’s not bad, relatively. Also, many credit repair companies offer you a free consultation where they will go over your options. If you’re looking for somewhere to start, I suggest you check out Rising Point Solutions, LLC. They’ll take care of you.

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416.

How To Write a Dispute Letter

Tell the credit reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of any documents that support your position. In addition to including your complete name and address, your letter should identify each item in your report that you dispute; state the facts and the reasons you dispute the information, and ask that it be removed or corrected. You may want to enclose a copy of your report, and circle the items in question. Send your letter by certified mail, “return receipt requested,” so you can document that the credit reporting company got it. Keep copies of your dispute letter and enclosures.

Credit reporting companies must investigate the items you question within 30 days, unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider gets notice of a dispute from the credit reporting company, it must investigate, review the relevant information, and report the results back to the credit reporting company. If the investigation reveals that the disputed information is inaccurate, the information provider has to notify the credit bureaus so they can correct it in your file.

When the investigation is complete, the credit reporting company must give you the results in writing, and a free copy of your report if the dispute results are changed. If an item is changed or deleted, the credit reporting company cannot put the disputed information back in your file unless the information provider verifies that it’s accurate and complete. The credit reporting company also must send you written notice that includes the name, address, and phone number of the information provider. If you ask, the credit reporting company must send notices of any correction to anyone who got your report in the past six months. You also can ask that a corrected copy of your report be sent to anyone who got a copy during the past two years for employment purposes.

Under the Fair Credit Reporting Act (FCRA) alone, there are hundreds of laws that an item has to follow to be reported on your credit report. If you have any questions about credit or credit reports message or email me at sales@disputedelegation.com. Better yet, you can contact me directly at 727-835-8516.

In recent news, yet another store has had a data breach. Kmart is the most recent store to have issues with customers identities and it may leave you thinking “Is there anything I can do to protect myself?" In today’s credit driven world, most people are not going to just stop using credit cards and go to cash.

However, there are some steps you can take to protect your identity and your credit:

1. Stop using your debit card as a debit card – Sounds silly but it’s one of the easiest ways for thieves to steal your information and money. Your PIN is your personal identification number and no one else is supposed to have it. That means that getting your money back is more difficult when using a debit card because it’s harder to prove theft.

2. It’s not identity theft without a police report – Customers tell us that they have had identity theft all the time. However, it’s not identity theft without a police report because the bureaus want to validate that a crime took place. If your spouse’s sister stole your social security number and opened up credit cards, defaulted, and you will not file a police report, expect to pay that debt off one way or another.

3. Read your statements carefully – That includes your credit card bills and bank statements. Thieves are using small charges to test your credit card. If it goes through, they keep making charges. Checking your statements thoroughly will help to detect these charges so you can notify your credit card company as soon as possible. Since the holiday season is fast approaching, you will want to start doing this more frequently now. To read more about this kind of identity theft, click on the link below.

http://business.time.com/2012/04/30/mysterious-credit-card-charges-why-you-need-to-check-your-bills/

If you have any questions or feel this might have happened to you message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416.

How Long Will Negative Information Stay On My Credit Report?

NEGATIVE INFORMATION AND HOW LONG IT STAYS ON MY CREDIT REPORT:

Late payments,charge-offs, judgments, short sale, foreclosure – Up to 7 years

Chapter 13 bankruptcy – Up to 7 years from filing date

Chapter 7 bankruptcy – Up to 10 years from filing date

Tax Liens – Until lien is paid in full, plus 7 years (may remain indefinitely)

Inquiries- Hard credit inquiries can only affect your FICO score for a maximum of 12 months. Usually, if they have an impact, it will be primarily in the first 6 months. They will drop off your credit report after 2 years.

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416. 

Credit DO's and DON'Ts

1. Definition of Credit- Predictive analysis of future default rate.

2. Online free reporting systems use a range of 500-990

3. Actual reporting agencies use range of 300-850

4. Two most important factors in your FICO:

35% Payment History

30% Amounts Owed

15% Length of the account

10% New Credit

10% Types of Credit

5. Amount and types of recommended debt you should carry:

2-3 credit cards

Auto Loan

Mortgage

6. Best advice to pay down accounts that are near limit is to go in 20% increments.

7. It’s best to pay it down to 19% of the limit. That way you are carrying some debt but in the lowest bracket. 5%-7% to fully maximize your credit score.

8. Paying off a debt completely or closing an old debt that you have had for a long time can hurt your score. Try and use that old car you’ve had every 6 months or so. OLD ACCOUNTS ARE GOOD!!

9. If you can’t afford to pay a card down, try calling them and ask about raising the limit on it. That can increase your score, as you will no longer be maxed out. That doesn’t mean you can go spend more though!

10. Most Creditors will update/upload information to the bureaus between the 5th and 10th of the month. Which is why, if you make a change, it can sometime take 30-45 days to report.

11. Do not pay the 3rd party collection companies the amount owed for the collection, pay the original creditor and ask for a “pay for delete” that will remove it. 

12. Never dispute online; it’s a waste of time. It will show back up in couple months. It’s a quick fix, not a long term solution.

If you have any questions about credit or credit reports or if you would like a free credit consultation, message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416.

“You don’t have to have debt to have good credit, but you do have to have credit to have credit!”

http://www.risingpointsolutions.com/blog/credit-dos-and-donts

Why Paying Collections Doesn't Raise Credit Scores

The FICO credit scoring models currently in use by lenders do not reward consumers for paying off collection accounts. Current versions of FICO are much more concerned with the fact that a collection occurred in the first place than they are with the balance of the account. In fact, a collection account will have virtually the same negative impact upon a consumer's credit scores whether the balance is $4,000 or $0. Paying a collection will also update the date of last activity, making it a newer negative account.

The purpose of a FICO credit score, is to predict the likelihood that a consumer will become delinquent on any of his/her credit obligations within the next 2 years. Current FICO credit scoring models are built with the assumption that a consumer who had collection accounts in the past is still likely to be delinquent on an account in the future. Therefore, the presence of a collection account regardless of the balance is going to have a negative credit score impact.

It is important not to become overwhelmed when you make the decision to begin trying to fix past credit issues. The best place to start is to get a copy of all 3 of your credit reports. You can access a free credit report from each of the 3 major credit bureaus every year at www.annualcreditreport.com. If you would like a copy of all 3 of your credit reports as well as your credit scores Please click here for a link to pull your credit.

Once you have your reports, review them thoroughly for mistakes. Credit mistakes happen more commonly than many consumers realize. In fact, the FTC estimates that over 40 million (or 79% of) consumers may have errors on their credit reports.

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com . Better yet, you can contact me directly at 727-835-8416.

Millions of Consumers to Gain Access to Credit Scores

Millions of consumers are about to gain access to their credit scores.

Citigroup, the fourth-largest credit-card lender by purchase volume in the U.S., is partnering with Fair Isaac Co., the provider of the credit score most widely used by lenders, to provide its customers with their FICO score beginning in January.

Here is a link to view the rest of the article:

http://blogs.wsj.com/totalreturn/2014/10/17/millions-of-consumers-to-gain-access-to-credit-scores/

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416.

Credit Problems and Divorce

Financial problems, divorce, and trashed credit reports  often go hand in hand. In fact, some studies suggest that up to 80% of divorces cite financial problems as the primary factor leading to the dissolution of the marriage. It is no secret that divorce tends to cause major credit issues after the fact as well - credit issues that can take as long as a decade to fully resolve. Protecting your credit from divorce is an unpleasant reality that many people face.

However, is it possible to protect your marriage from credit problems? If so many divorces stem from financial problems and disagreements does it not stand to reason that making a solid plan to address these issues before they get out of hand could be beneficial to your marriage itself? The answer to both of these questions is "Yes!" It is absolutely possible to protect your marriage from credit problems but it will take hard work, a solid plan, and a commitment to follow the plan. Follow the link below for 5 steps to help you get started.

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet you can contact me directly at 727-835-8416. 

http://www.hope4usa.com/credit-repair-news-charlotte-north-carolina/protecting-your-marriage-from-credit-problems

How Many Points Will An Inquiry Lower My Credit Scores?

The idea that inquiries lower your credit scores a particular number of points is a complete myth. There is nothing on a consumer's credit report that raises or lowers your scores a fixed number of points. For example, an inquiry does not always lower your score 4 points (or 3, 5, or 6 points for that matter). An on-time payment does not raise your credit score 5 points. A late payment does not lower your scores 30 points. That is simply not the way that credit scores work.

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet, you can contact me directly at 727-835-8416

http://www.hope4usa.com/credit-repair-news-charlotte-north-carolina/how-many-points-will-an-inquiry-lower-my-credit-scores

WHY MY CREDIT SCORE IS IMPORTANT WHEN GETTING A MORTGAGE?

THE BASICS:

Why is my credit score important? What minimum credit score do lenders require?

Your credit score affects your interest rates when applying for a home or auto loan, your insurance rates, and even some job prospects. Depending on the type of mortgage loan you want, most lenders require a minimum credit score of 620; if your score is below 620, you may still qualify for a loan if there are mitigating factors.

What is a credit score, and how is it calculated?
A credit score is a number that indicates to lenders and other businesses how much of a credit risk you pose if they lend money to you. More generally, a credit score may indicate to a future employer your reliability in meeting your obligations. Your score is based on several factors 

HOW IS MY CREDIT SCORE CALCULATED?
35% -- Payment History
30% -- Amounts Owed
15% -- Credit History
10% -- Inquiries, New Credit Lines
10% -- Types of Credit in Use

Who calculates my credit score?
Four companies calculate your score: FICO, Experian, Equifax, and TransUnion. The FICO score is the standard that most lenders use when they pull your score; FICO scores range from 300 (low) to 850 (high).

If you have any questions about credit or credit reports message or email me at michael@risingpointsolutions.com. Better yet you can contact me directly at 727-835-8416.