What is a Credit Inquiry?

If you ever plan on going through the process of getting a loan for something a credit inquiry will definitely be part of the process. Every lender that you come across from a bank to an auto lender will use a credit inquiry during your application process. While many people have heard the term thrown around, they may not fully understand what it means. Here are some things to consider about credit inquiries and how they work. 

What They Are

One of the most important pieces of information that you have is your credit history. Your credit history carries with it an unbelievable amount of information. Every account that you have ever opened and every bill that you have ever paid will usually be included on your credit history. With so much information, a good picture about what type of borrower you are starts to emerge.

When you request a loan from someone, they will undoubtedly want to know what kind of a borrower you will be. They cannot simply take your word for everything and just give you the money. Therefore, they need to check another source of information to see if they should loan you the money. 

The source of information that they check is your credit file. When a potential creditor checks your credit history to see what kind of borrower you will be, they are engaging in a credit inquiry. A credit inquiry is basically whenever a lender wants to check out your credit when they are trying to make an educated decision on your loan application. 

Information on File

When a potential creditor performs a credit inquiry on you, there is a lot of information that they can access. They will immediately be able to see everything about your credit situation. They can see how much your mortgage balance is, your car balance, and any other loans that you have including credit cards. They can see how much your monthly payments are and whether or not you consistently make them. They can see a list of your creditors and see which ones you are in good standing with. The amount of information that they can pull on you during a credit inquiry is staggering in most cases. 

How It Affects You

One part of your credit score has to do with the amount of credit inquiries that you have had during a given period of time. The more credit inquiries that you have, the more it hurts your score. Therefore, just looking at your score can actually lower it. However, the system will allow for multiple inquiries in a short period of time as they will let you shop around. If the inquiries are close together, they will count them as a single inquiry. With this information in mind, you should try and inquire about your credit as few times as you possibly can. If you go out and try to get a loan every few months, it could actually be a negative factor in your credit score. 


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