You decide you would like a new credit card but you’re not sure who has the best deal so you jump online and have a look around. You want to hedge your bets and make sure you get approval for a card, so you pick out 5 credit cards you like the sound of and apply for them all. After all, you don’t need to accept them all if they are approved and this way you are surely going to get at least one cross the line, right? Little did you know, each time you apply for credit, you receive credit inquiries on your file.
Credit inquiries can make the process of getting a credit card very difficult. If you apply for multiple loans at once then you can expect to receive knock backs from all the companies you applied to. This might seem strange if you have a good job and have never missed a bill payment. However, this is a reality. Even if your credit score is excellent, if you make too many inquiries, getting a loan can suddenly become very difficult. There are 2 types of credit inquiries: hard and soft.
What a lot of people aren’t aware of is that each time they apply for finance, they are almost certainly going to have someone make an inquiry on their credit report. That inquiry will be recorded for 5 years. That’s right, 5 years!
While it’s true that a credit provider can’t make a credit inquiry without you giving approval, gaining approval can be as simple as ticking a box on a website or saying “that’s fine” to a credit representative. But hang on, why are credit inquiries that never ended in credit being provided with a problem? Surely it only matters what inquiries lead to loans, right? You would be forgiven for thinking so, but unfortunately, the answer is no.
Let’s say you make an application for a home loan, the only information recorded is the date and type of the application (in this case a home loan), the credit provider and the amount; that’s it. The inquiry won’t say if the application was approved or declined or even if you took up the facility if it was approved. Basically the credit provider who looks at the past inquiries is flying somewhat blind.
Let’s say you’re a credit card provider looking at 5 recent credit card inquiries on a credit report. You don’t know if the past inquiries were declined or approved, and if approved how many credit cards they ended up with.
In today’s credit risk-averse world, the outcome of this misinformation is often a decline. Many credit providers will assume the past applications have been declined and assume you’re not telling them something, so they will decline the application just to be safe.
In many cases, you won’t even get the opportunity to plead your case as many lenders have fully automated credit scoring and these systems are triggered to react to recent inquiries and decline the application without looking into it further. For the most part, there are no clearly visible notices on application forms and websites that warn people that an inquiry will be noted on their credit report and the possible implications of making multiple applications.
Even if the consumer is aware an inquiry will be noted on their credit file, very few realize the potentially debilitating effects that a high volume of recent inquiries can have. Often only when the damage is done does this become apparent.
It makes little difference what type of credit is being applied for; home loans, business loans or credit cards, the problem remains the same.
The answer is you can’t, not in the short term anyway. Unless the inquiry was made without any authorisation there is little that can be done to have an inquiry removed from a credit file. The only cure is time. The more historic the listing, the less relevant it is.
A series of inquiries made 12 months ago would not be seen as being as important as a series of inquiries made over the past month. There’s no set rule for how old an inquiry needs to be before it’s not considered an issue. This is because each lender tends to carry different lending criteria and this criteria is under constant review. However there’s no doubt that the older the listing, the less relevant it is. This doesn’t help people who have made this mistake but desperately need finance, for them the pain is just getting started
Given how many people are affected by this problem, there needs to be more public awareness around this situation. Something as simple as a clear message next to the “submit” button on a website letting people know that a credit inquiry will be made, along with a warning that a high level of recent credit inquiries could result in credit issues, would be a great place to start. Armed with this knowledge I feel most people would apply for credit in a more informed and responsible manner.
If you are having credit issues, then call Clean Credit today for a free consultation. Through this quick conversation, we can answer your questions and explain What Credit Repair is and how it can help you.
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There have been a number of changes to credit reporting legislation recently. Many of these changes are in my opinion positive and were well overdue. For the most part they have been welcomed by credit providers and the general public but having said this, change is never easy and reform with credit reporting has generated its fair share of uncertainly and controversy.