Information on credit report inquiries - The Bills.com Blog

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Information on credit report inquiries

Question: If I'm submitting applications for apartments and these places are going to be checking my credit report to see if I qualify for a rental lease, will it affect my credit report or credit score? I live in mantioba , Canada.

Answer: Generally speaking, multiple credit inquiries on your credit reports can have a negative impact on your credit rating, as most scoring models regard a lot of credit inquiriesas a sign of higher credit risk. The reasoning behind this aspect of credit scoring is that applying for a large amount of credit over a short period of time can indicate financial problems and looming default. Also, the credit bureaus? statistical studies have shown that people who have applied for a lot of credit recently are more likely to default on their accounts.

However, the credit bureaus? scoring models purport to be able to distinguish between those consumers who are attempting to open multiple lines of credit and those who are simply shopping around for the best deal. The bureaus do this by grouping inquiries for a single purpose, such as inquiries from leasing companies, within a certain period of time into a single inquiry instead of multiple individual inquiries. The time frame used for the groupings varies between

scoring models; FICO currently uses a 45 day ?shopping? period. For example, if you apply for a lease with 50 different lessors within a 45 day period, all 50 inquiries created when the lessors pull your credit would count as a single ?shopping? inquiry. This single inquiry may slightly ding your credit, but certainly not as much as 50 individual inquiries would damage your score. When you view your credit report, you will see individual inquiries, but the inquiries will be lumped together when your credit score is calculated.

Of course, we all know that credit reports are not perfect, so while in theory the bureaus will lump all inquiries for the same purpose together, it does not always work as desired. So, my recommendation is to shop freely, but only actually apply with lessors from whom you actually would want to rent. The

fewer inquiries during the shopping period, the less likely an error will occur. Once you have obtained the apartment of your dreams, obtain a copy of your credit report and credit score to make sure that the inquiries from your shopping episode are appearing properly and that your credit score has not dropped significantly. If your score has dropped, it may be a sign that the inquiries are not being properly grouped by the bureaus, and you may want to file a dispute with the bureau(s) in question.

To read more about credit, credit reports, credit scoring, I encourage you to visit the Bills.com Credit Resources page at http://www.bills.com/credit/

I hope this information helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

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Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

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