Inquiries & their Effect on Your Credit Score

When a consumer seeks credit, the lender will report an inquiry on the consumer’s credit reports. When a bank sends out a pre-approved loan application or makes an account review, the bank reports that event as an inquiry. The former inquiries are known as hard inquiries and the latter as soft inquiries. Consumers reading their reports worry the inquiries are reducing their credit scores. However, the soft inquiries do not affect credit scores at all and the hard inquiries lower credit scores but not very much. For most people, one additional hard inquiry will takes less than five points off...

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New Credit Score Formula for 2008

Credit scores are determined using formulas designed to predict how likely a consumer will pay his or her bills. Fair Isaac is the leader having created the FICO credit-scoring formula. Fair Isaac has announced its formula will be revised this year. The new formula will deemphasize the effect of one late payment on your credit score on an otherwise unblemished record. Fair Isaac states the company’s analysts pulled reports of 5 million consumers to see how their credit profiles fared over time. More information may be found in a recent issue of SmartMoney magazine.

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Improving Your Credit Score: Four Myths Consumers Should Ignore

How do consumers get the best deal on credit? Most people know that furnishers–the lenders that supply credit–look at consumers’ FICO scores. The higher the score, the better deal the consumer will get. That means a lower mortgage rate or a more favorable interest rate on a new car. But how can consumers increase their credit score? A recent article debunks some of the more common myths about how consumers’ credit scores can be affected. 1)Closing Accounts Do Not Help Your Credit Score! Credit scoring formulas look at the difference between consumers’ available credit and what they are using. So,...

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Consumer Credit: Five Reasons to Have a Good Credit Score

Your credit score basically predicts the possibility that you won’t pay your bills. Creditors figure that the higher your credit score, the less likely you are to miss payments. Most credit scores on based on the Fair, Isaac & Co. model, known as FICO scores. But why is your credit score important? A recent article by Kiplinger’s Personal Finance Magazine explains who relies on that score: 1) Lenders. Most people would expect lenders to look at their credit scores, and indeed they do. Your credit score affects the rate you pay on your mortgage, your car loan and your credit...

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What Consumers Don’t Know About Credit

What consumers don’t know about credit can really, really hurt them, according to James Scurlock. Scurlock produced the excellent new documentary, Maxed Out, as a result of Scurlock’s quest to find out why America can’t get itself out of debt. Scurlock’s Newsweek article this week makes five points: 1) A high credit score doesn’t necessarily mean you can pay your debts; it just means you have lots of available credit. 2) Banks will lend you more than you can afford to pay back because they make most of their profits on the least responsible consumers. 3) Bankruptcy is not an...

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