An inquiry post occurs on your credit report when you apply for financing and the creditor pulls your credit report. For example, if you apply for an automobile loan at a Honda dealership, they will pull your credit report and then you have an inquiry from Honda Finance on your report.
The number and type of inquiries you have on your report can affect your credit score for the 12 months following. Although an inquiry remains on your report for 24 months, it affects your credit score for only the first year.
Inquiries can dock your credit score by up to 10% of your score. Therefore, you do not want excessive inquiries.
Here is how to prevent hurting your credit score with inquiries:
AUTO FINANCING INQUIRIES
First, don’t sign for permission for them to check your eligibility until after you read every word of the authorization form If you don’t understand the legalize–or even if you do–ask these questions:
- How many finance companies are you going to query, because I don’t want more than one inquiry to show on my credit report?
- If I don’t qualify for the best financing with you, then how many and which other finance companies are you going to query, because I don’t want my credit report “shot-gunned out to five or ten or even more creditors”? (Yes, sometimes they do that so 10-20 inquiries suddenly appear on your report, and you don’t want that.
Second, if you don’t have top tier credt, consider getting your own financing through your bank or credit union before going to the dealership. That way, you don’t risk having them create multiple inquiries.
But if you have top tier credit, then they’ll be happy to offer you excellent financing with their own company.
Last, if your credit is sub-par, don’t take a high interest rate auto finance loan, because they are ridiculously expensive and you end up paying way too much for the vehicle. Instead, save cash and work on improving your credit first.
MORTGAGE INQUIRIES
Mortgage companies are meticulous about following the law when ordering your credit report. They require you to provide your legal name, address, date of birth, and social security number, as well as sign permission for them to order your report. They maintain a file with your signature on the authorization form, as per federal law.
The way to protect yourself from excessive credit pulls by mortgage lenders is simple: do not tell them your social security number. They cannot pull your credit report without it. And don’t click on Internet ads and type in your SS number either!
Here is my #1 tip for shopping multiple mortgage lenders to get the best deal with ONLY ONE inquiry: Go to a mortgae broker! A broker pulls your credit report once and shops all their best wholesale lenders for you, which could be as many as 30 on their list. But wait, there’s more good news.
A mortgage broker can do what is called “a soft pull.” That is a credit report from one credit bureau that does not show up an an inquiry on your report. That’s right: zero inuiries. The broker then looks to see if you are qualified before doing a “hard pull.” This is useful if you’re not sure what your mortgage credit report will look like, knowing a mortgage report is stricter than the consumer report you receive on your own or from a credit card company.
Be smart and pick up a copy of Get the Mortgage You Want Like the Pros so you’ll know all the insider tip and strategies that we use for ourselves and our families when buying a home. You can see it here.
WHAT IF YOU ALREADY HAVE TOO MANY INQUIRIES ON YOUR REPORT?
if you made the mistake of applying for financing at too many places and your credit score has taken a hit, you wll probably need to wait out the 12 months. Now in 2024, the credit bureaus are no longer removing inquiries based on a letter from you. They want to hear from the creditor that the inquiry is a mistake — and then they will delete it.
If you need the latest credit repair information that goes deeper into credit report, you’ll want Book 2: Repair Your Credit Like the Pros DEEPR DIVE. It has 27 new letters written by me. See it here.
On the other hand, if a company (such as an auto dealership) pulled your report multiple times without your knowledge or consent, then I would locate the person who has the authority to get that changed on your credit report. It will take asking some questions and going up the ladder of command to get to that person, and it might even be one of the top executives. You will need to explain that their unauthorized multiple inquiries is damaging your score, and you want them to instruct the credit bureaus to delete the excessive inquiries, because you don’t want to have to file a complaint with the CFPB, BBB, Google review, Yelp, etc., and you want to remain a fan of Honda/Ford/whoever it is, and recommend them to your friends and associates.
If you have a story about inquiries to share, please leave it in the Comments and I will see it and reply.
This article is very true. I have seen it with mine own eyes at a vehicle dealership. The “finance” manager’s goal was to get potential borrowers into the highest interest rate possible, even pushing some good FICO’s to Non (Subprime) prime status. As part of the franchise arrangements, there is a percentage on kickbacks from the loan they send to the financial institutions.
Thank you for adding to the conversation, George. I appreciate hearing from an eyewitness.
I meant to say from the loan they send to the financial institutions.
I edited your original post as you wanted it to be. Thank you again for your valuable feedback.
I will be ordering your second book this Black Friday weekend !!
your first book is awesome , and has been extremely helpful .
Thank You !
Thank you, Ron. I’m confident you will find Book 2 extremely insightful and helpful. I spent three years researching, including interviewing a credit lawsuit expert, a FICO executive, credit repair business owners, and others.