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Improving Your Credit Score, Inquiries and Denial

Understanding Your Credit Report And Credit Score -- Part 4

How Does the FICO Score Count Inquiries?

The FICO score counts inquiries or requests a lender makes for your credit report or score when you apply for credit. Too many inquiries can have a negative impact. Looking for a mortgage or an auto loan (rate shopping) may cause multiple lenders to request your credit report within a short period of time. The score counts multiple inquiries in any 14-day period as just one inquiry. The score also ignores all inquiries made in the 30 days prior to scoring. If you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. One credit inquiry will usually take less than five points off a score. Inquiries can have a greater impact if you have very few accounts or a short credit history.

Tips on Improving Your Credit Score:

Request and check your own credit report and your own FICO score once a year. This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or FICO. While having credit cards and managing them responsibly can lead to a high credit score, having no credit cards can make you seem like a risk.

Keep your balances low or, if possible, pay them off completely each month.

Pay off debt instead of moving it around. Owing the same amount but having fewer open accounts may lower your score.

Don’t open credit cards that you don’t need just to increase your available credit or because you want it to look like you have a better mix of credit.

If you have only had credit for a short time, don’t open a lot of new accounts at the same time. New accounts will lower your average account age, which will affect your score if you don’t have a lot of other credit information.

Shop for auto or mortgage loan rates within a set period of time. FICO scores distinguish between a search for a single loan and a search for many new credit lines by the length of time over which inquiries occur.

Don’t close credit cards to try to raise your score. Closed accounts show up on your credit report.

Repair your credit history if you have had problems. Open new accounts responsibly and pay the bills on time.

What if I am Denied Credit?

If you have been turned down for credit, the Equal Credit Opportunity Act (ECOA) gives you the right to find out why within 30 days. You are also entitled to a free copy of your credit bureau report within 60 days, which you can request from the credit reporting agencies.

When a lender receives your credit score, up to four “score reasons” are included. These will explain the reason for your score. If the lender rejects your request for credit, and your FICO score was part of the reason, these reasons can help the lender tell you why you were rejected and can help you determine how to improve your credit.

At Willis-Knighton Federal Credit Union, we are always happen to discuss your credit report with you and help you develop a plan to improve your score.

(Reprinted in part from https://www.dfs.ny.gov/consumer/creditreport.htm)

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