Credit checks and credit score

[iamwiz82]

How many credit checks is considered a warning sign? I understand they stay on for 2 years but become less important after 6 months.

 

[Drakkon]

depends on the company....some will say 1-2 are too many...others wont care if u have 5-6.

 

[Mill]

Varies quite a bit. Which lender are you worried about?

 

[iamwiz82]

Originally posted by: Mill
Varies quite a bit. Which lender are you worried about?

Mortgage. Unsure of the lender since we have not nailed down who we like yet.

EDIT: I had a mortgage check my credit in Oct, if i get another one in Jan. is that two or is it one? I think I have read that there is a Fair Lending practice or something where multiples for the same thing count as one?

 

[StageLeft]

They stay on for two years and affect your score for 12 months. You can have several and be fine. They only marginally lower a score, unless you have very limited credit. A mortgage company won't care if you've got a few on there.

I think I have read that there is a Fair Lending practice or something where multiples for the same thing count as one?

I think that's only if they're in a very short period of time, and possibly for similar things. In any case that will count as two inquiries.

 

[iamwiz82]

Originally posted by: Skoorb
They stay on for two years and affect your score for 12 months. You can have several and be fine. They only marginally lower a score, unless you have very limited credit. A mortgage company won't care if you've got a few on there.

Thats what I wanted to hear. We need new cellphones and I believe they will run a credit check, but as long as 3-4 isn't too bad, I'm ok.

 

[Descartes]

Originally posted by: iamwiz82

Originally posted by: Mill
Varies quite a bit. Which lender are you worried about?

Mortgage. Unsure of the lender since we have not nailed down who we like yet.

EDIT: I had a mortgage check my credit in Oct, if i get another one in Jan. is that two or is it one? I think I have read that there is a Fair Lending practice or something where multiples for the same thing count as one?

They count as one if they're within 14 days, I believe.

 

[Vic]

Originally posted by: Descartes

Originally posted by: iamwiz82

Originally posted by: Mill
Varies quite a bit. Which lender are you worried about?

Mortgage. Unsure of the lender since we have not nailed down who we like yet.

EDIT: I had a mortgage check my credit in Oct, if i get another one in Jan. is that two or is it one? I think I have read that there is a Fair Lending practice or something where multiples for the same thing count as one?

They count as one if they're within 14 days, I believe.

Correct. It is 14 days. The law is the Fair Credit Reporting Act (FCRA).
These days, almost all mortgage lenders are unconcerned about inquiries themselves except insofar as they affect your credit score. The days of having to explain inquiries to underwriters are long gone.

2 inquiries in 3 months will do very little to your score. I would not worry about it. The effect of inquiries on credit scores is greatly overstated for the most part IMO. I've seen applicants with 20+ inquires on their bureaus who still had upper-700's scores.

 

[Mill]

Originally posted by: Vic

Originally posted by: Descartes

Originally posted by: iamwiz82

Originally posted by: Mill
Varies quite a bit. Which lender are you worried about?

Mortgage. Unsure of the lender since we have not nailed down who we like yet.

EDIT: I had a mortgage check my credit in Oct, if i get another one in Jan. is that two or is it one? I think I have read that there is a Fair Lending practice or something where multiples for the same thing count as one?

They count as one if they're within 14 days, I believe.

Correct. It is 14 days. The law is the Fair Credit Reporting Act (FCRA).
These days, almost all mortgage lenders are unconcerned about inquiries themselves except insofar as they affect your credit score. The days of having to explain inquiries to underwriters are long gone.

2 inquiries in 3 months will do very little to your score. I would not worry about it. The effect of inquiries on credit scores is greatly overstated for the most part IMO. I've seen applicants with 20+ inquires on their bureaus who still had upper-700's scores.

Yep. In case of a mortgage I wouldn't think you have that much to worry about unless you have marginal credit. Vic is correct that you can have 20+ inquires and have a high score, but there are also people with high FICOs that get knocked down a LOT by inquiries. I was recently reading of someone who lost over 20 points to an inquiry. It really depends on the length of your credit history and your credit status. The amount of inquiries you are making shouldn't hurt you.

 

[MySoS]

Remember, credit checks you do your self, and ones you didn't request do not harm your credit score in any way. Vic were most of those personal inquiries, if so that would explain why it didn't affect their score.

 

[Vic]

Originally posted by: MySoS
Remember, credit checks you do your self, and ones you didn't request do not harm your credit score in any way. Vic were most of those personal inquiries, if so that would explain why it didn't affect their score.

No, they were not personal inquiries, or "soft pulls". Those do not even show up on lender-pulled credit reports. In that case, the borrower still had a high credit score because they had an otherwise strong credit history.

Inquiries can only affect the credit score by a maximum of 10%, and in fact are the least weighted factor in determining score. In fact, if you engage in that all-too-common practice of switching credit cards and transferring balances every 6 months in order to take advantage of those low introductory interest rate offers, you are harming your score more than inquiries do.

How credit scores are calaculated (from the source)

 

[StageLeft]

I was recently reading of someone who lost over 20 points to an inquiry. It really depends on the length of your credit history and your credit status.

That's the key. Back when I had almost no credit history I had a score of over 700, because what little I did have was positive, and I was using one of the online score estimators and you could plug in things like an inquiry, or one late payment, and at that stage anything negative was just nailing it, because my credit history was so minimal (but what was there was so positive as to give me a good score).

 

[Vic]

Originally posted by: Mill
Yep. In case of a mortgage I wouldn't think you have that much to worry about unless you have marginal credit. Vic is correct that you can have 20+ inquires and have a high score, but there are also people with high FICOs that get knocked down a LOT by inquiries. I was recently reading of someone who lost over 20 points to an inquiry. It really depends on the length of your credit history and your credit status. The amount of inquiries you are making shouldn't hurt you.

Exactly. If you already have strong credit, then a few inquiries shouldn't hurt you. If you already have a 780 score, then dropping down 20 points to a 760 doesn't mean anything. You'll still be able to get the best deal out there. But if you have marginal credit and a 635 score, then dropping 20 points down to 615 could very mean the difference between approval and denial.
Regardless, I'm willing to bet that that person who lost 20 points to one inquiry had more factors involved than just that inquiry. I think it's important to realize that one thing that the credit scoring model does NOT consider is what the score was the last time that person's credit was pulled. Each pull and score is a singular snapshot in time. So no one score actually "drops", what has happened is that the borrower's credit profile has changed in some way that has affected their score.

More info on credit inquiries

And some credit facts for people with damaged credit, because I know for a fact that a lot of you are in denial. According to FICO, only 20% of Americans have a credit score below 620. The average credit score is a 715. Less than 40% of Americans have ever had a single 30-day late payment in their lifetime. Less than 10% have ever defaulted on a single account in their lifetime.
Have credit card debt? Roughly half of all credit card holders carry a balance of less than $1,000. Only about 10% have total credit card balances of more than $10,000.

 

[StageLeft]

Only about 10% have total credit card balances of more than $10,000.

Are you sure that's right? I thought the average credit card debt was around $8k, though surely some people with exhorbitant debt could be bringing that number up massively. I only know, with certainty, the credit card debt of myself and four other couples, and one of them is about 5-10k, another at least 5, and another at least 5 also. Bad, bad! One, though, keeps $1k or less, which I consider not to be credit card debt, because if your household income is $60k/year (for instance), or more, it's probably just shuffling around funds and could be paid off at any time.

 

[Vic]

Originally posted by: Skoorb

Only about 10% have total credit card balances of more than $10,000.

Are you sure that's right? I thought the average credit card debt was around $8k, though surely some people with exhorbitant debt could be bringing that number up massively. I only know, with certainty, the credit card debt of myself and four other couples, and one of them is about 5-10k, another at least 5, and another at least 5 also. Bad, bad! One, though, keeps $1k or less, which I consider not to be credit card debt, because if your household income is $60k/year (for instance), or more, it's probably just shuffling around funds and could be paid off at any time.

I honestly have no idea if it is right or not, it's simply info off off my.fico.com. My opinion is that the average credit card debt data is somewhat weighted like you said. Yes, CC debt is bad IMO. I avoid it at all costs, and seek professionally to help others avoid it (or reduce it if they already have it, which is usually the case).

 

[iamwiz82]

Originally posted by: Vic

Originally posted by: Skoorb

Only about 10% have total credit card balances of more than $10,000.

Are you sure that's right? I thought the average credit card debt was around $8k, though surely some people with exhorbitant debt could be bringing that number up massively. I only know, with certainty, the credit card debt of myself and four other couples, and one of them is about 5-10k, another at least 5, and another at least 5 also. Bad, bad! One, though, keeps $1k or less, which I consider not to be credit card debt, because if your household income is $60k/year (for instance), or more, it's probably just shuffling around funds and could be paid off at any time.

I honestly have no idea if it is right or not, it's simply info off off my.fico.com. My opinion is that the average credit card debt data is somewhat weighted like you said. Yes, CC debt is bad IMO. I avoid it at all costs, and seek professionally to help others avoid it (or reduce it if they already have it, which is usually the case).

I poked around and foudn this: http://moneycentral.msn.com/co...vingandDebt/P74808.asp