How Inquiries Impact Your Credit Scores
Mortgage lenders depend on the information found in credit reports and credit scores. One of the numbers that cause fluctuations in a consumer’s credit scores is inquiries.
Inquiries, according to Equifax.com, are “entries that appear on your credit report when your credit information is accessed by a legally authorized person or organization (including yourself).” Inquiries can include “an application for credit, goods or services; an account review made by a company that you already do business with; or a preapproved offer of credit.”
Inquiries can be either hard or soft. Soft inquiries such as account reviews, preapproved credit applications, and employer checks don’t impact credit scores. Consumers can check their own credit without impacting their credit scores.
Hard inquiries, such as an application for a new loan, credit card or line of credit, can temporarily lower credit scores by as much as five points and remain on your record for up to two years. but, if you handle the credit responsibly, with no late payments, your scores could go back up again in just a few months. If you’re just out of school and want to build your credit, only apply for credit cards and loans that you need.
If you’re applying for a mortgage, every point counts, so follow your lender’s advice on what to do. Don’t open new lines of credit for six months to a year before applying. Apply to multiple lenders, so you can shop for the best terms and rates.