Credit Inquiries and Your Rating
In some cases you have to sign a similar document when applying for work or even when attempting to rent an apartment. Employers and landlords do have the legal right to check out your credit before offering you work or even habitation. In many cases a disclosure of such an entity wanting to check a consumer's credit is placed on the front page of any business contract, rental request, or even application for employment.
Even insurance companies decide to check on the credit profiles of those they are thinking of offering vehicular insurance to. Consumers with a poor credit rating may have to pay more for the insurance coverage, and in some cases they might not even qualify for coverage at all. In the same vein, consumers whose credit rating is too low will likely have to pay too much for loans and other fiscal products, or they may be denied credit altogether. Yet did you know that each and every time someone checks your credit a notation that marks this check is placed into your credit profile? As such, they eventually accumulate and may end up counting against your credit score, potentially even dragging it down.
There are some credit inquiries that have no effect on the credit rating. Most notably, these are inquiries initiated by the consumer who is checking up on their credit profiles. Another credit inquiry that is not considered detrimental is the request received by a creditor with whom you are currently doing business or an employer who is checking on a potential employee's credit profile. It is the inquiry of a new would-be creditor that is taken into consideration when determining the effect it will have on the overall credit rating. This credit rating culminates in the calculation of the credit score, and this score is the first piece of information any prospective creditors consider when they receive an application for credit from any consumer.
Credit reporting agencies reveal that credit inquiries have a small impact on the overall credit rating, but nevertheless, their share of weight - when it comes to being included in the calculation of the overall credit score - is estimated to be right around 10%. Consumers with good or very good credit will hardly notice any difference in their credit rating, even after applying for one or more credit products. Consumers with borderline good credit, however, may notice that their score is far more affected by the request for credit and as such may actually suffer a slip in their rating that might take them into the less desirable categories. The good news is that the credit inquiries only stay on the credit profile for a short few years before dropping off.