Credit Inquiries, Credit Applications, and Credit Scores
By L. Jed Berliner, Springfield Bankruptcy Attorney on Oct 7, 2007 in Consumer Protection, Credit Reports, Financial Resources on the Web, General Bankruptcy Information, Massachusetts, Personal Finance
“People with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.” This is from Fair Isaac, the creators of the FICO credit scoring process. So consumer-initiated credit inquiries, like applying for a gasoline sponsored card to save five cents per gallon, will lower your credit score and may increase the costs of car insurance (says a writer to www.bankrate.com) or your next car purchase. Ouch !!!
A FICO credit score is made up of payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and types of credit (10%). The credit inquiry from your application for a gasoline-rebate credit card is considered “new credit” (whether or not successful) and the more inquiries lower your score. (A creditor-initiated inquiry, perhaps just to check on an existing account, does not affect your score.)
This is simply outrageous. You apply for a new credit card to save mony on a rebate program, and it costs you more in other expenses because your credit score is lower, and you don’t have a clue this will happen.
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