All about credit inquiries

Credit inquiry is an item on a credit report that shows copy of credit report has been requested with permission by a business. To be very exact 10 percent of consumer credit score is determined by the inquiries made on their credit reports. All of credit inquiries are added to a customer credit report when a business demands for a copy of his/her credit report. According to The Fair Credit Reporting Act, there are some acceptable reasons within which businesses can request a copy of a consumer credit report: to grant credit, for collecting debt, in case of Underwrite insurance, Employment, License issuing and for legitimate business transactions. There are two types of credit inquiries hard and soft inquiries.

Credit inquiries on a credit report can indicate a borrower risk factor. In case, there are too many credit inquiries to a consumer report, it means he/she is in some financial trouble and is in dire need to credit. Greater amount of credit inquiries to a consumer can lower his/her credit score.

If you have a long credit history, an additional credit inquiry might not affect your credit score. But if you have a small credit history with fewer accounts, an additional credit inquiry could lower your credit score by few points. Credit inquiries are listed on a consumer credit report for the next two years. But the credit score is calculated on the basis of inquiries made in the last one year with the recent inquiries have the bigger impact.