Credit Inquiries

Credit Inquiries occur when you sign an application for a loan, credit card, insurance policy, job application, and many other everyday practices. Consumers may not realize how often outside companies make inquiry into their credit history and credit score. Each time an inquiry is made, it is recorded on each of the three consumer credit rating bureaus – Equifax, Experian, and TransUnion. And each time an inquiry is logged, it can potentially affect your credit score.

Different Inquiries Have Different Results

Credit bureaus understand you want the best interest rate on your home or auto loan. They recognize that when you go shopping, you’re going to fill out a lot of applications for credit. When the inquiries appear on your credit report, the credit rating bureaus comprehend the reason for so many inquiries over a short period of time. These multiple inquiries do not affect the credit score as long as they occur within a 30-45 day period. Likewise, when credit card companies do pre-authorization inquiries to thousands of consumers at a time, the inquiry is disregarded and not given any value. However, if you fill out applications for credit cards at the rate of one per month, the inquiries from the credit card companies will affect your score and in most cases, send it down.

Understand Your Credit History

From a consumer standpoint, the credit industry is vital to almost every aspect of our financial lives. Lines of credit make living easier and sometimes help us through temporary monetary hardships. Credit reporting enables us to establish a history which demonstrates our reliability to lenders, who in turn grant us loans for houses, cars, and educations. Responsible spending and debt management establish us as consumers who can be trusted with more credit and additional loans when we need them. It’s a win-win situation that results in more resources and advantages when we play by the rules and behave with financial responsibly. It can be a terrible downward spiral when we make mistakes or don’t behave responsibly.

Credit Is a Privilege

Having credit is a privilege, not a right, and it’s up to us to establish a relationship with money which enables us to retain the privilege. Credit card companies profit from our mistakes, which is how they are structured to work. When we behave responsibly with money, credit card companies don’t make as much profit, so it’s not in their interest to provide us with an education about spending. Nevertheless, it’s up to us to keep ourselves informed, to protect our credit and to know our rights. While credit card companies have been forced to provide some educational materials to consumers; the ultimate responsibility lies with us.

Maintaining Your Credit History Through Responsible Spending

Without credit, the dangers of spending beyond your means are obvious. In many cases, without credit cards, you end up having to borrow money from people you know, usually friends and family. The intimacy of your debts makes you continually aware of the guilt that comes with being over extended. With credit cards, the need for extra money can remain your secret.

It’s a Head Game

To promote the feeling of entitlement associated with having credit, the credit industry uses aggressive advertising to reinforce the concept of using credit as a normal way to spend. As a result, many people don’t think twice about going into debt. In many cases, they even expect to do it. It’s become the norm in our culture, but as it often happens, people fail to consider the consequences. A little debt can help build your credit scores, but as soon you miss a payment, your credit scores are knocked down further than they were ever boosted. More to the point, as soon as you’re overextended, hits to your credit can come in many forms, encompassing almost every aspect of your life. Thanks to all the information collecting and reporting agencies, any kind of missed payment will find its way back to your credit report, and it seems to multiply once debt becomes unmanageable.

A Little is Good, A Lot Isn’t

A small amount of debt can have some benefits, but having debt is always a risky proposition. Credit card companies want you to remain indebted to them because that’s how they make a profit. To spend responsibly means staying out of debt most of the time and only using debt when necessary. Making payments on time will build a positive credit history. If you want better credit and are financially stable, you might be able to afford a little more debt. The safest way to protect your credit is to have little or no consumer debt. Protecting your credit history is your responsibility and it can only be achieved through safe and careful spending conducted within your means.

An excellent article about credit responsibility put out by the Public Broadcasting Service can be found here:

http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/responsibility.html

Improve Your Credit History By Keeping Tabs On Credit Reports

Another aspect of credit responsibility is keeping tabs on your own credit history. The law is on your side when it comes to mistakes and inaccuracies, however, it’s up to you to discover and dispute them. Staying aware of your credit history also helps protect your identity. Your credit history is extremely important to your financial life. Remember to review your free reports each year and use this website to find out how to investigate reporting agencies and remove errors.

Government compiled information from the FTC concerning credit cards and consumer loans can be found here:

http://www.ftc.gov/bcp/menus/consumer/credit/loans.shtm