Loan Shopping Can Harm Your Credit Score
Shopping for credit online can have serious hazards to your credit report. Every time you shop for a loan it results in a credit inquiry. Those individual inquiries can reduce your credit score. Credit scores range from 300 to 900 with 900 being best. Each time you apply for credit, your credit reports will place an inquiry at the bottom of your reports. While a few inquiries are fine, too many can result in lowering your credit score and denial of credit.
Creditors or potential lenders look at too many inquiries as "desperate" and base part of their credit decision on those excessive inquiries. In addition, the potential creditor has no idea that those inquiries have not resulted in a recent loan which could disqualify you from being approved. The good news however, is scoring models have now been adjusted to count multiple inquiries within a 14-day period as a single request.
Too many inquiries seems to be the topic of the day with consumers. Many don't realize the impact of too many inquiries and only begin to understand the affects after being turned down for loans because of it.
Protect yourself and your credit score by following a few simple rules:
Reduce & unauthorized: You should limit your inquiries and dispute any that you do not recall or agree with. Disputing inquiries to the credit bureaus is pointless. They are not responsible for removing those and do not investigate them unless the originating creditor instructs them to. Take your complaint directly to the lender with a certified letter.
You reviewed your credit: This is where you have have requested a copy of your credit report. This is a "soft" inquiry and does not negatively affect your credit. It is not seen by potential creditors. (Neutral)
Credit Bureau Review: This again, has no impact on your credit and simply means the bureau reviewed your file. (Neutral)
Creditor review: This is simply a standard review that is done by existing creditors. It also does not impact your credit. (Neutral)
Credit Request: This can be negative if you have too many. Inquiries remain in your profile for 2 years, so too many of this type can be negative and result in denials. (Negative)
Collection agency review: Very negative. If you have any inquiries from a collection agency who has begun collecting on an expired debt (expired under the statute for reporting, which is 7 years) then that does not qualify for a permissible purpose and should be removed. Inquiries from a collection agency are very negative.
IRS: Very negative. Inquiries from the IRS usually tell a potential lender that you are either being audited or have a tax lien pending.
Tenant Screening: This type of inquiry is O.K. It simply shows you are moving or did move and the landlord ran a credit check. (Neutral)
Dispute Process
To dispute inquiries you need to write to the creditor direct. Simply send a certified or registered letter to the creditor and ask for removal.
Here is a sample of what to write:
Dear Creditor:
In a recent review of my credit reports I discovered an inquiry from your company. I do not recall authorizing you to review my credit. Accordingly, I would like to be sent proof that I initiated or requested for you to review my credit. Please respond at your earliest convenience.
Based on the FCRA, I must have authorized you to review my credit with written permission. Please forward a copy of that written authorization. If you are unable to provide me with proof or do not retain records of such authorization, please promptly remove the inquiry from my credit report (name which credit bureau) and send me written confirmation of the removal.
Thank you for your timely reply.
Sincerely,
Joe Consumer
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