Making Payments On Time & Lowering Your Credit Utilization
Before applying for any new lines of credit, its always a good idea to step back and examine your financial habits. Making your loan payments on time is a huge part of your credit score. This means, if youre paying on time for a while and then you miss a few months, those missed payments are still going to be considered on your credit report. The best thing you can do for your credit score is to work on consistency. Work on a reasonable budget and make your payments on time.
The second largest aspect of credit scoring is credit utilization, so if you work on making payments on time, youre also working on the second issue. Credit utilization is a measure of how much credit youre using in total as compared to what your maximum limit is. If your limit is $1000 and youre using $995, your credit utilization is high. Your score will benefit greatly from paying off some of that debt.
How Credit Scores Are Determined
Information found in your credit report is used to determine your credit scores, which might include the following:
- Your history of debt payments
- Hard inquiries6 on your credit score from new credit applications
- The amount of debt you currently have on your credit accounts
- The age of your credit accounts
- The amount and type of loan accounts you have open
- The percentage of available credit you’ve utilized
- If and when you had a foreclosure, declared bankruptcy, or had debt sent to collections
It’s common to see varying credit scores when you look at different sources.;Credit Karma and other services might display different credit scores, like TransUnion VantageScore, which is different from the TransUnion FICO score that’s used for your Apple Card application.;Your credit report and the timing of when your credit score is updated can affect your credit score.
For information about credit scores from TransUnion, please click here.
How Hard Inquiries Impact Your Credit Score
Hard inquiries may, but do not always, impact your credit scores, Ulzheimer said, noting that one of the most common misconceptions about credit inquiries is that they always have a negative effect on your credit score. If a hard credit inquiry does negatively impact your credit score, it is likely to drop by no more than 10 pointsand the damage should last no longer than a year. Hard inquiries automatically fall off your credit report after two years.
The impact, if any, will last 12 months, Ulzheimer advises. Once an inquiry becomes older than 12 months, they are not seen by either FICO or VantageScores credit scoring models.
How Do Public Records And Judgments Impact Fico Scores
Public records are legal documents created and maintained by Federal and local governments, which are usually accessible to the public. Some public records, such as divorces, are not considered by FICO® Scores, but adverse public records, which include bankruptcies, are considered by FICO® Scores. FICO® Scores may be affected by the mere presence of an adverse public record, whether paid or not. Adverse public records will have less effect on a FICO® Score as time passes, but they can remain in your credit reports for up to ten years based on what type of public record it is.
What You Can Do If Your Application Is Approved With Insufficient Credit Or It’s Declined
If your application is declined, a message with an explanation is sent to the primary email address associated with the Apple ID you used to apply for Apple Card. The message might show your credit score. If information provided by a credit bureau contributed to your application being declined, you can request a free copy of your credit report from that credit bureau using the instructions in the email you receive.
If you have a freeze on your credit report, you need to temporarily lift the freeze before you apply for Apple Card. Learn how to lift your credit freeze with TransUnion.;
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Dispute An Unauthorized Or Inaccurate Hard Inquiry
Remember, if you did request the credit inquiry because you were applying for a loan, then you cant dispute it with the agencies.
But if something looks suspicious, then lets take action.
If you find you could have a case of identity theft youre dealing with, then you will need to file a police report.
You would need the information from your police report to help you dispute the unauthorized inquiry.;
If you think this is a case of a mistake in reporting, then you can work directly with each bureau.
File A Dispute with Each Credit Bureau
Since you receive three different credit reports, youll need to dispute the inquiry with each corresponding bureau.
Whats A Soft Credit Inquiry
According to the Consumer Financial Protection Bureau , a soft checkâalso known as a soft inquiryâis a review of your credit file and existing accounts. Soft inquiries donât impact your credit scores.;
Examples of Soft Credit Inquiries
- Viewing your own credit reports and scores.
- Opening a bank account.
- Pre-qualified or pre-approved credit card offers.
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How Important Is It To Remove Inquiries From Your Credit Report
Inquiries are the least important items to remove from your credit reports compared to other negative items like missed payments and delinquent debts.
They have a relatively low effect on your credit scores and cause less and less damage over time. Because they only affect your credit score for 12 months and drop off entirely after two years, hard inquiries are by no means the worst thing you can have on your credit report.
Many negative items stay on there for anywhere between seven and ten years. So if your credit history is riddled with several derogatory marks, removing hard inquiries should be your last priority as you work on increasing your overall scores.
It often helps to talk to a professional credit repair company to help you analyze your credit reports and prioritize issues that need to be addressed. They have the legal know-how of what your rights are with your different creditors and how likely you are to get certain items removed.
How To Minimize The Effect Of Hard Credit Inquiries
When youre buying a home or car, dont let a fear of racking up multiple hard inquiries stop you from shopping for the lowest interest rates.
FICO gives you a 30-day grace period before certain loan inquiries, like those for mortgage or auto, are reflected in your FICO® credit scores. And FICO may record multiple inquires for the same type of loans as a single inquiry as long as theyre made within a certain window. This window is typically about 14 days.
While some lenders can rely on scoring models that give you more time to shop without incurring an additional hard inquiry, you may want to stick to 14 days to do your comparison shopping, since you likely wont know which scoring model a lender relies on to generate your score.
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What Will Not Create An Enquiry
Some activities will not cause an enquiry to be lodged on your credit file:
- Switching loan types .
- Buying a prepaid mobile phone.
- Closing an existing loan or credit card.
- Opening a bank account.
- Opening a visa debit card.
None of these activities will cause a credit enquiry as you are not actually applying for credit. For example a prepaid mobile phone is paid in advance, so it is not a credit facility.
Ways To Help Manage Hard Credit Inquiries
When you know what can trigger hard inquiries, you may be able to better manage their impact.
Here are some other tips to help you manage hard inquiries on your credit:
is another easy way to monitor your credit. With CreditWise, you can stay on top of your VantageScoreÂ® 3.0 credit score and TransUnion credit report for freeâeven if youâre not a Capital One customer. With the CreditWise Simulator, you can even explore the potential impact of your financial decisions before you make them.
Combining Multiple Inquiries For Credit Cards
The;shopping around logic that combines multiple inquiries for;auto, mortgage, and student loans is not designed to work for credit cards.
With installment loans, even though you may be approved for the loan, you still have the option of choosing whether or not you want to accept the loan and take delivery of the money. You will probably not open all the accounts, so multiple inquiries can;be collapsed into one.
Sometimes, however, if you apply for multiple credit cards with the same issuer in a short period of time, you may only end up with one inquiry on some or all of your credit reports. This is not because the issuer is combining the inquiries and only pulling your credit once. Instead, the credit bureaus see that you have multiple inquiries that look exactly the same, because theyre from the same issuer on the same day. Since the credit bureaus want to avoid duplicate information and the inquiries look identical, they may only count one of them.
What To Remember When You Are Rate Shopping
If you need a loan, do your rate shopping within a focused period such as 30 days. FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which the inquiries occur.
When you look for new credit, only apply for and open new credit accounts as needed. And before you apply, it’s good practice to review your credit report and FICO Scores to know where you stand. Viewing our own information will not affect your FICO Scores.
As a general rule, it is OK to apply for credit when needed. Be mindful of this information so you can start the credit-seeking process with more confidence.
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What Is The Difference Between A Hard And Soft Inquiry
When you review your credit reports after applying for a loan, credit card or other form of credit, you’ll likely see the hard inquiry it caused, but you also may see other inquiries, called soft inquiries.
Soft inquiries are often the result of you checking your own credit report, a preapproved offer of credit, or a periodic account review by a company you already do business withbut those aren’t the only events that can cause them. They differ from hard inquiries because they don’t generally reflect an application you’ve submitted for credit, and could even be the result of something like the IRS verifying your identity for your tax refund, for instance. Soft inquiries do not affect your credit scores.
How Long Will Negative Information Remain On My Credit Reports
It depends on the type of negative information. Heres the basic breakdown of how long different types of negative information will remain on your credit reports:
- Late payments: 7 years from the original delinquency date.
- Chapter 7 bankruptcies: 10 years from the filing date.
- Chapter 13 bankruptcies: 7 years from the filing date.
- Collection accounts: 7 years from the original delinquency date of the account
- Public Record: Generally 7 years
Keep in Mind: For all of these negative items, the older they are the less impact they will have on your FICO® Scores. For example, a collection that is 5 years old will hurt much less than a collection that is 5 months old.
What Are Inquiries And How Do They Impact Fico Scores
Inquiries may or may not affect FICO® Scores. Credit inquiries are classified as either hard inquiries or soft inquiriesonly hard inquiries have an effect on FICO® Scores.
Soft inquiries are all credit inquiries where your credit is NOT being reviewed by a prospective lender. FICO® Scores do not take into account any involuntary inquiries made by businesses with which you did not apply for credit, inquiries from employers, or your own requests to see your credit report. Soft inquiries also include inquiries from businesses checking your credit to offer you goods or services and credit checks from businesses with which you already have a credit account. If you are receiving FICO® Scores for free from a business with which you already have a credit account, there is no additional inquiry made on your credit report. FICO® Scores take into account only voluntary inquiries that result from your application for credit. Hard inquiries include credit checks when youve applied for an auto loan, mortgage, credit card or other types of loans. Each of these types of credit checks count as a single inquiry. Inquiries may have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk.
If I Dont Agree With My Fico Score What Should I Do
Your FICO® Score is provided to Wells Fargo by Experian® based on information within your credit report on the calculation date . If you feel this information is inaccurate, your next step should be to request a free credit report from annualcreditreport.com. If theres incorrect information within any of your credit reports, follow each bureaus instructions on how to dispute that information. If theres incorrect information about your Wells Fargo accounts, please call the Wells Fargo phone number in your credit report.
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How Long Does Credit Information Stay On Your Credit Report
Your credit report is essentially your credit history. It compiles all the information concerning your credit habits and creates a tool that can be used by lenders and creditors to assess your creditworthiness. While your credit report does represent a good portion of your credit history, the information is not saved for the total duration of your credit using life. Your credit information is eventually removed from your to make room for newer information.
Of course, the question on everyones mind is, how long does this credit information stay on my credit report for? This is what were going to take a closer look at so you can know exactly how long specific credit information will affect your credit report.
How Soft Inquiries Impact Your Credit Score
Soft credit inquiries have no impact on your credit score. Though soft inquiries might appear on a special section of your credit report, they are not recorded by either FICO or VantageScore, which means they cannot affect your credit score.
The reason soft inquiries are not tracked by FICO or VantageScore is because soft inquiries are not directly related to a credit application. A lender might conduct a soft credit inquiry as part of a credit pre-approval, but thats not the same thing as completing the credit application process. If you decide to apply for a credit card after receiving a pre-approval offer, the lender will do a hard credit pull before deciding whether to formally accept you for the card.
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Hard Vs Soft Credit Inquiry
There are two types of credit inquiries, hard and soft inquiries. A;hard pull;occurs when;you fill;out a loan or credit card application with a lender or credit issuer, permitting them to pull your report.
A hard;inquiry will stay on your credit report for 24 months but are only factored into your credit score for 12 months.
Anytime you check your credit report or score online at sites like Credit Karma or Credit Sesame, it does not affect your score; this is a soft credit inquiry.
The credit scores you see from online sites where you can pull your score yourself are not your FICO scores; they are your consumer credit scores. The scores you see online and the score a lender sees will be different.
Here are some examples of hard and soft inquiries
How Many Credit Inquiries Is Too Many
Inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports.
How Multiple Credit Inquiries Affect Your Credit Score
Do you panic whenever a lender or landlord proposes pulling your credit report? If so, a lot of that anxiety may be overblown.
Too many credit inquiries in a short enough period of time will make a dent in your credit score, but this shouldnt deter you from rate shopping for the best offers.
Its ironic that so much attention gets focused on credit inquiries because they are such a tiny part of the FICO score, said Craig Watts, public affairs manager for the Fair Isaac Corporation .
We generalize by saying that typically no more than 10% of a FICO scores weight is determined by a persons taking on new credit, Watts said. But for most people, inquiries have little to no influence on their FICO scores.
To put that 10% into perspective, payment history, i.e. whether or not youve been paying your bills on time, makes up 35% of your credit score.
So, a credit inquiry is just a small nick in your credit report, but not all inquiries are created equal.