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Credit Score Advice: Don’t let credit enquiries affect your credit score

By Brian Anderson
Published: Monday, April 19th, 2010

Everybody has heard the terms credit, credit report and credit score. In these times of economic hardship, these terms are being thrown about. However, few actually know what credit is and what does credit report have or what credit score denotes.

Credit is when a person wants to make an investment and goes to a creditor or a lender. This creditor or lender must now take the decision regarding the loan. To take the decision, the creditor will inquire into the applicant’s credit history. This process is known as an inquiry. The creditor is then provided with your credit report that contains all the details regarding your credit history. It will contain all the details regarding all your credits and how they might have been handled. It will show details of any late payments, overdue amounts or even charged off accounts.

Based on this information, the creditor might reject your loan application or accept it. If it is accepted, the interest rates on the loan will also be calculated based on these details. The credit score is a numerical representation of your entire credit history. The agency that calculates the credit score is known as FICO and it has a formula for the calculation. This formula gives different levels of importance to different parts of your credit history and calculates the credit score.

One question that is often asked is what affects my credit score. There are a lot of factors that might affect your credit score. One of these factors would be the number of inquiries into your credit history. There are basically two types of inquiries. One is known as the hard inquiry and the other as a soft inquiry. The soft inquiry, also known as the soft pull will not affect your credit score at all. This will not even show up when FICO is calculating your credit score. Soft pulls can be done without your permission. They are usually the kind of pulls done just before your bank sends you a pre approved loan offer.

Hard pulls are the kind of pulls that are bound to affect your credit scores. These kind of pulls need your express permission and you will usually find a form asking permission for a hard pull in between many forms when you are trying to open a new account. The opening of a new account is the most common reason for a hard pull.

A hard pull can affect your credit score adversely. This is the reason why many credit repair experts you against trying to open many new accounts in a short span of time. This will result in a bad credit score. Every hard pull reduces your credit score by around five points for six months. It is visible to anyone who runs a credit check on you, hard or soft pull. The impact of hard pulls will be greater if your credit report has a short length of credit history. Longer credit histories will have lower impacts. Statistics show that people with more than six inquiries or hard pulls are eight times more likely to file for bankruptcy than the other people.

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