Real Estate News

Credit Inquiries: Why Lenders Care


Written By: David Reed
Tuesday, November 20, 2018

FICO scores are calculated using an algorithm originally developed by The FICO Company. This algorithm considers five different characteristics of a credit file. Of course, payment history carries the most weight, contributing 35 to the total, three-digit score. The second most important >

How long someone has used credit is also a factor, making up 15 of the score and the final two of the five both contribute 10. Types of credit used and credit inquiries. Types of credit boosts scores when consumers responsibly use different types of credit and credit inquiries logs in the number of times someone has requested credit. But about that 10 for a credit inquiry, if it makes up such a small part of the total score, why do lenders care about this category?

For one, requests for credit over the past year or so wonrsquo;t hurt scores but making several requests for different credit accounts in a >

Each time a consumer makes a request for credit, that request is recorded in the credit file. Again, an occasional request is fine. What can cause a loan application to stop dead in its tracks is to see a recent credit inquiry on a credit report but no indication any account has been opened. It usually takes about 30 days. That can mean someone opened up a credit account or maybe bought a car and financed it but the amount borrowed and the terms havenrsquo;t yet made it to the credit bureaus. When a lender looks at a credit report with recent inquiries, there is no way the lender can properly determine a consumerrsquo;s new monthly payments. Someone with >

When this happens, the lender will request the borrower to explain the inquiry and verify that no account was opened and if an account was opened, to send in documentation regarding the terms of the new account. Thatrsquo;s why loan officers tell you that once you apply for a mortgage, just sit tight with any other credit requests until and after your loan is ultimately funded and closed.



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