It isn’t Christmas, but did you know that there may be entries in your credit report that are much like the ghost of the Christmas past? This is especially true if you make credit applications, even for just a simple credit card, in too short a timeframe. Let’s look at a scenario.
Let’s say you’ve been able to keep your credit score in good shape, you’ve got one credit card, no loans, and you’ve just been promoted and got a hefty raise. So you want to treat yourself a bit to a new car and sell your old clunky one. Why not add in a new credit card? So you go off to that wonderful world of the internet, fill up and submit several credit card applications – not one, but six of them.
If your personal credit report already looks good and your credit score is something to be proud of, chances are you’ll get approved on several of the applications you filed. But wait – think about what this will do to your credit score! For every credit application you filed, several points will be taken away from your score. Credit experts say that the number of points our credit score will be affected by credit inquiries depends on your credit history and overall profile. This means that if you’re a high scorer, your score could be dinged by just 5 points for every inquiry, but if you’ve got a low credit score it could be higher. And, the number of inquiries matters too. Lenders will think twice about granting you credit if you have many inquiries into your instant credit report. They say that statistically, people who have six or more inquiries into their reports are more likely to declare bankruptcy than those who don’t have any.
Credit inquiries are likely to stay in your report for about two years. So those six credit applications, plus three inquiries from car dealerships you’ve talked to while window shopping for a new car, that means nine credit inquiries. Now do the math: nine inquiries at 5 points each, that means 45 points taken away from your credit score. Then, these inquiries will remain in your free instant credit report for two years. Somehow, that doesn’t seem so good anymore.
Have you submitted any credit application or inquired about credit cards, loans, or mortgages lately? The best thing to do is to get your credit report for free and then scrutinize all your credit inquiries. Try to recall the circumstances relating to each inquiry. When you were at the car dealership, did you expressly state that you were going to buy your car from them? Did you give out your credit information without thinking twice even though you were just window shopping? Many of us make the mistake of giving away our confidential information without thinking carefully before we do. That careless disclosure of your credit information to the car salesman just cost you about 5 points from your credit score.
Think twice about disclosing your financial and credit information to any lender. Learn where to get your free instant credit report and how to check your credit report for errors so that you can improve your credit profile and raise your score.
Jeremy Englewood is a credit manager and writer with over fifteen years experience in the banking industry. His advice on personal finance topics such as how to get your free annual credit report have provided inspiration to people who want to repair their credit. Read more of his articles at HowToEstablishGoodCredit.com.
