The Better Credit Blog

In the following article I will explain how credit report inquiries can modestly lower your credit score. Depending on the type of inquiry, your score can lower 3 - 10 points -even more with multiple inquiries. While this should not be the pinnacle of your credit worries, it is helpful information to keep in mind.

What is an inquiry?

As the name suggests, a credit inquiry is the nomenclature used when anyone pulls your credit report for review. There are two main types of inquiries: inquiries that are only seen by you, and inquiries that are seen by everyone who reviews your credit report. Only the latter affects your credit score.

While multiple inquiries make a bigger impact on your credit score, multiple inquiries within the same 2-week period are usually only counted as one inquiry. The credit bureaus started doing this after customers started to complain that their scores were dropping 20 - 30 points in one weekend of car shopping (often when you are seeking financing for a new car, dealerships will make 20+ inquiries).

This brings forth an important tip: when you are seeking credit (filling out credit card applications, for example), do it in “bursts”. If you are going to apply for 5 credit cards, minimize the credit score impact by doing it all on the same day and then waiting a couple of months (if you have no success the first time) to do it again. Multiple credit inquiries indicates to credit bureaus that you are desperately in need of credit because you cannot honor your current obligations. This is why they lower your score.

Types of inquiries that do not affect your score

1. Pulling your own credit report is not seen by anyone but you.
2. Inquiries for pre-approval offers such as those “You’ve been pre-approved!” letters you get in the mail.
3. SOME credit inquiries made by debt collectors.

Types of inquiries that do affect your score

1. Inquiries made by creditors when you apply for credit.
2. Inquiries made by cell phone companies when you apply for a cellphone.
3. Car dealerships inquiries.
4. Other misc. credit applications (such as a home loan).

Hopefully this gives you a better idea of how inquires work. I know I did not list every type of inquiry that can affect your credit score. My attempt is to simply give you a list in which will provide a general rule of thumb to go from.

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The fastest and easiest way to increase your credit score is to dispute any negative items on your credit report that are incorrect or not yours. If you haven’t checked your credit report in a couple of years, there are likely incorrect items that are hurting your credit. This is another reason to check your credit report every six months or so. When I checked my credit report after letting it go a couple of years I found two debts marked as CHARGE OFF that weren’t even mine. After disputing these items my credit score increased 70+ points.

Items that may have a negative impact on your credit score

Refer to my list of negative items when looking for inaccuracies to dispute.

Don’t forget to look over the “Personal Information” section of your credit report. This is the section that lists your current and previous employer(s) and address(es). Both of these can impact your credit score and they are often inaccurate. The calculation of your credit score takes into account how stable you appear to be. Therefore, if your credit report shows 15 previous addresses and 5 employers in the past 2 years it will lower your score by a dozen or so points. While personal details such as address and employer do have some impact, it’s not very much, so this should be the least of your worries if you have debt. Nonetheless, just double check for small inaccuracies such as multiple listings of the same address (this is very common).

How to dispute credit report inaccuracies

The credit reporting agencies have made the process of disputing an inaccurate item manageably simple. In most cases, however, it has been my experience that after you file a dispute, it can take them a couple of months to investigate and correct the error (don’t get freaked out if you haven’t heard anything in a month). It can be a particularly lengthy process if the item in question involves identity theft.

There are generally 3 ways to dispute an inaccuracy: online, by phone, or by mail. Do it online, because otherwise it will take forever. All 3 of the credit reporting agencies have online forms you can fill out to file a dispute. Very easy.

Here are links to the credit reporting agency’s dispute centers

• Equifax Online Dispute
• Experian Online Dispute
• TransUnion Online Dispute

Keep in mind: If an inaccuracy is listed on all three credit reports, you must dispute it with all three credit agencies.

Don’t dispute accurate entries

Some people will claim that you should dispute items even if they are completely accurate in hopes that the creditor will be unable (or unwilling) to verify the disputed item. I am advising you against this for a few reasons.
First, it’s against the law. Second, if the debt is a large amount you can bet your ass the creditor will take the time to prove it’s yours and it’s accurate. Third, if you attempt to file multiple disputes at once, the credit agency will lock you from filing a dispute for awhile.

Once the investigation is complete

Once the investigation is complete you will receive an email (if you filed online) that the correction has been made. Also, you will receive a free copy of your corrected credit report (this is required by law). Note: this does not count towards your free annual credit report. Depending on the item that was corrected your credit score will also change to reflect the correction. Again, getting inaccuracies corrected can greatly improve your score and in most cases it’s an easy process.

Everyone will tell you this, but I am going to tell you again: Don’t do anything until you have your credit report in your hand and you’re looking at it.

I didn’t do this and later it came back to kick me in the ass. I went around the house and grabbed all of the letters from creditors and started paying off the small ones first –the debts I knew were for a large amount had been left unopened for months because I was too nervous or depressed about the situation to open them. If you are reading this, there is a good chance you know the feeling. The same goes for phone calls from creditors

Here are some reasons why you should check your credit report before paying any debts.

• Some of the debts may have not yet gone to collections.
• Even if some of the debts have gone to collections, there is a chance that the debt has not yet been added to your credit report. (keep in mind that once a debt has been added to your credit report, by law, it can stay on there for 7 years –even if you pay it off. I will talk more about this later.)
• Most debts (unless they are for an extremely small amount) can be negotiated –this brings up a whole new topic that I will cover in another post, so for now just note that point.

I will briefly speak to each point listed above.

1. Any debt that has not yet been to collections SHOULD BE PAID FIRST. I cannot say this loud enough. It’s pretty easy to find out if a debt has gone to collections without having to call them –just check your credit report and then look through your letters for two separate companies demanding payment for the same debt. Dealing with deceptive and nasty debt collectors should be avoided at all costs.
2. If a charge has gone to collections but hasn’t been added to your credit report (an unlikely scenario in all honestly), pay it. The point here is that why pay off debts that are already on your credit report (and likely will be for 7 years) before you pay off debts that have not yet been added to your report?
3. Negotiations skew into a topic that is very important: negotiate with creditors. This point is so important that I will dedicate a whole (or a couple) posts to it. For now keep in mind that sometimes you can get a creditor to remove a debt from your credit report completely by simply negotiating!. However, if you can’t wait for some ungodly reason check out my resources section. I have created some sample credit removal letters in Microsoft Word format to guide you.

How do I get my credit report?

The good news is that most people can get one free credit report every year (in some states it’s two). Check your state here

Also, and this is important: there is only one website that is truly authorized to provide this free credit report, and it is www.annualcreditreport.com. I am sure you have seen that commercial for freecreditreport dot com (I won’t even dignify this wretched company with a link). It has that corny idiot saying something like, “I happen to be thinking of a number. Do you know what it is? It’s my credit score, and it happens to be a 740!” As a matter of fact, I read a few weeks ago that they got themselves in big trouble for deceptive practices –if you look at the bottom of their new commercial there is a disclaimer that says (and I’m paraphrasing), “the credit report is free but you have to pay us a monthly fee for some other crappy product”.

If you have already used up your free credit report or for some reason you can’t get it at www.annualcreditreport.com, I recommend getting one from one of the 3 credit reporting agencies: Equifax; Experian; or Transunion. I will talk more about the 3 credit reporting agencies in another post. Personally, I would go with Equifax for the simple reason that it is the most popular, and thus is probably the most accurate (because this will likely be the first credit reporting agency a creditor will report to). Also, if you are doing this for the first time, I recommend paying the extra money to get a 3-in-1 report. All of the credit reporting agencies offer this report, and for the extra $10 or so you will get a credit report that shows entries from all 3 agencies.

You can get your credit score or credit report over the phone, if you are worried about security

Here are the phone numbers:

• Equifax: 1-800-685-1111
• Experian: 1-866-200-6020
• TransUnion: 1-800-888-4213

Take home points:

1. Get a copy of your credit report before you do anything.
2. www.annualcreditreport.com is the only truly authorized website to get your free credit report.
3. Pay debts that haven’t be added to your credit report first.

Got your credit report?

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