HOW DO
BUSINESS INQUIRIES AFFECT CREDIT SCORE
Even if you
have a very good credit score too many credit inquiries can prevent you from
qualifying for new loans or other forms of credit as a high number of credit
inquiries can negatively impact your credit score
SO WHAT IS
BASICALLY A CREDIT INQUIRY-A credit inquiry means that whenever you make an
application for new credit to any lender, car dealer or mortgage lender you are
indirectly authorizing the lenders to obtain a copy of your credit report from
the credit bureaus. Such forms of inquiries appear in your credit report.Credit
inquiry is a small but very important
factor considered in measuring your total creditworthiness.
The reason
why credit inquiries affect your credit score is because lenders prefer giving
credit to those who possess lesser risk and are in the financial capacity to
repay the credit. If you have applied for or opened too many credit accounts in
a short time span .you represent as a high risk to the lender and the lender is
not likely to grant any new lines of credit to you. You are more of a defaulter
for the lender as they may presume that you will not be in a position to pay
off the credit.
How does a
credit inquiry affect credit score? The impact of the credit inquiry on the
credit score varies from individual to indiviual.The effect a credit inquiry
will have is directly related with the payment history. A credit inquiry will
have a deeper impact on an applicant with a shorter payment history. The larger
the number of credit inquiries the higher the risk for the lender. More than
4-6 credit inquiries can drastically bring down a person's credit score and
their appearance in the credit reports might even declare an individual
bankrupt.
IS THERE A
WAY TO REDUCE THE IMPACT OF BUSINESS INQUIRIES ON MY CREDIT SCORE
Yes there is
a way to reduce the impact of credit inquiries. In case you need a new line of
credit, try to go for rate shopping (rate shopping means applying for credit to
several lenders to get the best possible interest rates within a very short
period of time)
Do not grant
permission to any lender to acquire a copy of your credit report from the
credit bureaus until you are ready to make a purchase. Continue to build your
credit score with making regular payment of bills on time, having a low debt
load and keeping low credit utilization and applying for new credit only when
necessary.
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