Repairing your credit is probably one of the most difficult parts of adult life to deal with. You are now paying for the careless mistakes you made in your youth. What can you do, and what shouldn’t you do?
One thing is for sure: never apply for more lines of credit or loans while trying to increase your score.
How do credit and loan applications impact credit?
What happens when you apply for a loan or line of credit? A recording is put on your credit report that you have tried to get money from somewhere, even if you were turned down. Why would they do that? Banks and lenders need an idea of your risk, and how many loans you have or are applying for.
What qualifies as an inquiry? Are all the same?
Applying for credit results in a credit inquiry. Not all are the same – there are both hard and soft inquiries.
A hard inquiry shows when you are applying for a line of credit for something like a car loan or credit card. Soft inquiries are indicated when your credit report is scanned for an employment background check, pre-approval, or surfing around for mortgage rates.
Basically, hard inquiries require actually requesting money, while soft inquiries indicate there was no money or credit requested.
Impact on your credit score
How do the inquiries affect your credit score? It’s easy to distinguish between the two types of inquiries by looking at the first word. Think of a soft inquiry as literally “soft”. These will not have an effect on your score. Good thing, because you can’t always control how often these happen.
Hard inquiries are the strong and powerful ones with the potential of lowering your credit score. With only a couple inquiries, it likely won’t be noticeable. However, requesting 10 credit cards and a car loan in the same month… you are going to be in trouble!
Tips to Help in the Credit Repair Process
On a positive note, there are things you can do to improve your credit rating at any time. It simply requires being financially responsible. Pay your bills on time, don’t overspend on your credit cards, and only apply for loans and lines of credit you need.
When looking into a mortgage, don’t worry about shopping around for the best rate. Make sure you stay consistent, and do it all within a 30-day time frame to avoid looking shady to lenders.
Before taking out new lines of credit or applying for loans, pause for a moment! Think about your current credit situation, and what you are doing to yourself. If you have poor credit already, these inquiries, could potentially damage your score. Get in touch with our credit repair experts by calling today to learn more.
Have you tried to open a line of credit, or did you apply for a loan and notice a difference in your credit score? Share your story by telling us what happened in the comments below.