Credit inquires are a key component of your overall credit rating. Understanding how they impact your score is an important step to achieving a top score.

Credit inquires are a key component of your credit score. You know that too many inquires can hurt your score, but are unsure which inquires impact your score and how much effect they will have. How do your protect yourself from too many inquiries?

Fortunately, no one can pull your credit just because they want to! For example, your best friend cant pull your credit to see if you really paid cash for your new car! Legitimate reasons for pulling credit include:

To extend credit

Debt Collection

To Underwrite Insurance

A Job Offer

Licensing through Government Agency

Business Transactions

Although your credit may be pulled for the above reasons, not all of these credit pulls will have a negative impact on your credit score. Only what is call hard inquires lower your credit score. These are inquires made when you have applied for credit.

When you apply for insurance or employment, your credit score is not impacted. This is called a soft inquiry. You can also pull and look at your own credit as often as you want without lowering your score.

It is difficult to determine exactly how hard inquires with impact your score. About 10% of your credit score falls under a category called new credit. Inquires are part of this. How much impact each inquiry will have depends on the overall information and depth of your credit file.

The most basic thing you need to understand is that too many inquires too quickly will cause a major drop in your score. The reason is that when you make multiple credit applications over a short period of time, you appear to be desperate for money. Lenders get very nervous because they have no way of determining how many accounts have actually been opened. This means they cant determine if you can actually afford a new obligation.

What should you do when you are trying to get the best possible deal on a loan for a new home or car? Can you shop around?

At one time, your score would have been damaged even if you were just shopping for a good deal. Luckily, the laws have been changed in your favor.

Under the new laws, mortgage and car inquires made within 14 days of each other are treated as a single inquiry. (Some lenders extend this out to 45 days.) Also, a buffer is in place so all mortgage and auto inquires within 30 days of scoring are ignored. The key point to remember is if you are going to shop around, be quick about it!

The bottom line: if you are going to shop, do it quickly! By understanding how credit inquires work, you can optimize your credit score and get the loan approval you are looking for!

Related Posts:

• The Secret of Your Credit Score
• Bureau Credit Score – 7 Strategies To Improve Your Credit Score Legally
• Straightforwardly Improve Your Credit Score!
• What You Need to Know About Credit Bureaus
• Quickly Raising Your Credit Score