Why Are Inquiries Used As A Part of the Credit Scoring Model

Inquiries really have a large impact on the credit score of person. However, they will be listed by all credit bureaus as part of factors that affect your credit score. The reason is that an enquiry represents a debt that has still not found its way on your credit report as an active account. An enquiry made as a result of your application for credit represents a situation where you are undertaking more debt. Since this information may be of importance to the future lenders where they decide whether to extend you further credit or not in the face of how much credit you already have written to you, inquiries are considered while cultivating the credit score. Multiple inquiries may represent the fact that you are trying to undertake more debt than you can handle. Since these credit accounts may not yet appear on your credit report this information becomes crucial for lender to decide on your credit application.

However, inquiries are almost never a single factor for denial of credit to a consumer. Inquiries coupled with the fact that you already have a bad credit history may result in denial of credit. Although the impact of an enquiry on a credit report is minimal if you already have a marginal credit score the reduction of your credit score by a few points as a result of inquiries may put you in a bad risk segment in the lender’s eyes.

When you already cannot manage the debt that you already have applied for more credit concerns lenders because the potentially new loan could put you under more pressure and financial constraint putting you in a situation where you are more likely to to have trouble paying your debts in the future.

For people who have a strong credit history inquiries not important and significant to their credit score. While they may have a minimal impact it is usually temporary.

As to why an enquiry may be listed as a factor affecting the credit score even for a person who has a good credit rating is that the credit reports tried to list all factors that affect the credit score. If there isn’t much negative information affecting your credit rating inquiries are listed as a risk factor because there is little or nothing else affecting the score.

It is usually advised not to apply for credit three to six months prior to making a credit application for a major purchase.