How To Protect Your Fico Score While Rate Shopping

Written by mrcredit101
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While inquiries into your credit report can hurt your FICO score, the creators of the FICO scoring formula understand that consumers will want to shop around for the best rates, especially on homes and cars. This is why, although inquiries into your credit report can hurt your score, the formula ignores inquiries that are mortgage- and auto- related which are made within the past 30 days. Therefore, if the formula finds inquiries before this period, it will lump together related inquiries as one.

As an example, let's say you initiated inquiries with six car lenders these past two weeks. That will be counted as one inquiry. However, you also rate shopped for condo mortgage rates within the same period and inquired with two lenders. That's another inquiry. Therefore, your credit report will reflect two inquiries - one for mortgage and another for an auto loan. Now, if two months from now you decide to continue shopping for good car amortization and interest rates, that will be counted as a different inquiry.

In order to avoid lowering your FICO score, what you need to do is focus your rate shopping on a concentrated period of two weeks. Don't stretch the rate shopping period out, because the inquiries will be counted separately if they're too far apart from each other, and that is sure to affect your score. Also, since auto and mortgage inquiries are counted separately, it is best not to do both at the same time.

Before you do any rate shopping, surf the internet and find out the rates from the different lenders' websites before contacting them. This way, you'll be able to narrow down your list to a few select ones and minimize inquiries into your credit report.

One other thing you should be careful about is not to give out your credit, personal or financial information when you do visit lenders or car dealers, especially if you haven't made your decision to buy from them yet. Many consumers have reported dozens of inquiries into their credit report after having casually visited a car dealership. It's possible that the dealer decided to check out which lenders would be willing to give you a car loan in case you decided to buy from them.

Before you go rate shopping, get a copy of your credit report and FICO score and see what your chances of getting a loan are, given your score. There are websites which allow you to plug in your FICO score and see how much interest rate you should expect with that score.

Avoiding unnecessary and excessive inquiries into your credit report and FICO score is particularly important for those who are already struggling with a low score. Remember that too many inquiries will not only bring your score further down; it could also scare lenders off when they see your credit report.

Being vigilant about your FICO score is important. If you have a low score, it might be a good idea to work on raising your FICO score first before applying for additional credit.


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