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The Effects of Inquiries to Credit Worthiness

By Janet Lacey
Published: Tuesday, March 2nd, 2010

Inquiries can be found at the end of credit reports. These lists of individuals and companies are those who have recently accessed the account holders’ reports and scores. Inquiries are vital in the application for financial agreements such loans, installments and credit card accounts. Lenders and creditors through inquiries consider the possibilities that the borrower is shopping too many debt accounts, is doing a spending spree, and is a potential fraud. Borrowers with too many inquiries are usually turned down because of this reason. In a way, inquiries are the index used by lenders and creditors in initially assessing the risks that they will take in giving debts to their borrowers.

In most cases, lenders only accept borrowing applications if the borrowers only have at most six inquiries in the past six months. There are no exactly set numbers for excessive inquiries; each lending company most probably has its own benchmark on the number of inquiries. There are cases of borrowers doing credit repair, who found out that their files are being accessed without their permission. This is a common case in most car dealerships; there are auto salespersons that pull out their potential buyer’s files from the credit bureaus to assess how he or she can sell the car to the potential buyer.

An inquiry accounted in the file of an individual will affect his or her financial viability even if the inquiry was made by another type of lender or creditor. This means that even if an auto salesperson was the one to pull out the file of an individual, the inquiry made by the auto salesperson will still affect the individual even if she or he is applying for a mortgage loan. Inquiries will appear in the credit report of the individual as inquiries only with no specified reason why it has been pull out for.

Consumer laws on debts and borrowing do not cover inquiries. This means that when an inquiry history is recorded in the file of an individual, it is almost impossible to delete. Adding up to the problem, most credit bureaus refuse to investigate the validity of an inquiry account. Consumers who find out that they have more than six inquiries within six months are left but to wait for another six months before applying for debts. Too many inquiries will burden the owner of the credit report for appearing on his or her report for the next two years.

Some inquiries are accounted by the credit bureaus in their written reports as codes. These codes pertain to the different types of creditors or lenders who may have looked at the individuals’ credit reports. The lump sum of inquiries can be attributed to pre- approved or pre- screened offers. Some lending companies pay the credit bureaus to make a list of consumers that can qualify for their readied financial offers. Inquiries are made by these companies to see who will fit to the criteria that they have set. The Fair Credit Reporting Act empowers the recipients of reports with inquiry accounts to ask for the meaning of the codes and full details of what are the reasons for the inquiries.

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