Applying for Credit Can Hurt

The number of times you apply for credit makes up 10% of your credit score.

While these numbers have changed a lot in the past 2 years, the average consumer has not applied for new credit in the past 20 months. When you apply for any type of credit it indicates a need for more liquidity. While it is not always the case, credit repositories view your application for credit as a risky behavior where you may be getting in over your head. That is why they lower your credit score when you apply.

So you never want to give anyone permission to view your credit report unless you want that new credit account. A few years ago the federal government made it so that you can shop for a mortgage or auto loan. They did this by making only your first credit pull for a mortgage or auto loan affect your score. You can then have any other mortgage companies or auto loan companies pull your credit within a short period of time with no adverse consequences. There is some confusion to the amount of time you have to shop around. Some people say it is 14 days and others say it is 30 days. The rules appear to be 30 days before the next credit pull would affect your score. So shop around but don't delay. A change of one point on your credit score can mean .125% to .25% increase or decrease in your interest rate.

Please note that if you are getting a new auto or home insurance policy your insurance company will most likely pull your credit. This will not count as an inquiry on your credit report. You may also pull your own credit report through www.annualcreditreport.com or any other service. When you pull your own credit and not a potential new creditor your score will not be affected.