We deliver free actionable tips, inspiration, and an
occasional kick in the pants weekly to your inbox.

The secret of how to apply for credit as often as you want without it affecting your FICO scores

Sample Newsletter | Stephen Snyder

Are you watching your credit inquiries?

Pretty much every time you apply for credit or insurance—you’re giving the company you’re applying with permission to review your credit reports.

This is called “permissible purpose.”

If you’ve read anything I’ve written before, you should know that every time a company reviews your credit reports you become the proud owner of something called a “credit inquiry.”

A credit inquiry is a listing of who reviews your credit reports and on what date. It’s like a date stamp with the lender’s name on it.

The problem with credit inquiries is that some of them can, and will, lower your FICO credit scores.

Based on my independent research, I’ve found that each inquiry can lower your credit scores by 12 points. And in some cases, even more.

Think about it…

Every time YOU apply for credit you could lower your FICO scores

That’s right—every time YOU apply for credit you could lower your FICO scores…making it more difficult and expensive for you to get credit or insurance in the future.

You already know how to shop for credit strategically to minimize the impact of credit inquiries.

The problem is that there’s a lot of confusion (and several myths) about how to deal with credit inquiries on your credit reports.

So, let me straighten things out…

All credit inquiries fall into one of two groups

First off, not all credit inquiries will hurt your scores. In fact, many inquiries have no impact on your scores at all. All credit inquiries fall into one of two groups…

…hard or soft.

Heh…I didn’t create these distinctions!

A hard inquiry is the type of inquiry that shows up when YOU apply for credit. Some examples of hard inquiries are when you apply for a car loan or a boat loan…or when you call your credit card company and ask them to increase your credit limit.

These are all situations where YOU have asked the lender to give you some form of credit. When YOU initiate an inquiry, it’s a hard inquiry.

A soft inquiry is used to describe all of the other inquiries on your credit reports. An example of a soft inquiry is when a bank or credit card company sends you a solicitation in the mail to try to get you to apply for credit with them.

One exception is when you purchase your TransUnion or Equifax FICO scores from www.myfico.com/12. Although you initiate the inquiry, you’re not applying for credit, so a soft inquiry appears on your credit reports.

The biggest difference between the two types of inquiries is that soft inquiries do NOT have any impact on your FICO scores.

Hard inquiries, on the other hand, can have a negative impact on your FICO scores.

The secret of how to apply for credit as often as you want without it affecting your FICO scores

There’s a silver lining with hard inquiries. There are two situations where, if you shop for credit properly, you can have an infinite number of hard inquiries…but they will count as only one.

Of course I’m referring to auto and mortgage inquiries made within a 45-day period.

When you’re shopping for a car or home, chances are lots of different lenders are going to review your credit reports and scores. The FICO scoring models are smart enough to know that you’re not buying multiple cars or houses at the same time.

They know you’re most likely shopping at several different auto or mortgage lenders to compare rates.

The magical 45-day window

In the past, if you had multiple auto and mortgage inquiries in a 14-day window, they would be treated as 1 inquiry.

In recent years, FICO has adjusted their newer FICO score software so that the 14-day window has been expanded to a 45-day window. This gives you much more time to shop around for the best auto and mortgage rates.

Since we’re on this topic, let me remind you of a little-known trick that could also help your credit scores.

It’s what I call the…

“Err on the side of the consumer” secret

It’s possible that there are more than just auto and mortgage inquiries that fall into this 45-day window of opportunity.

Here’s the secret…inquiries from banks and credit unions may also fall into this window of opportunity.

Let’s face it, when you walk into a bank or credit union you could be applying for a plethora of things:

• A new checking account

• A credit card

• A debit card

• An ATM card

• A personal bank loan

• A brokerage account

• A mortgage

• A student loan

• An auto loan

• Overdraft protection

• A money market account

…you get the idea.

How does the FICO credit scoring model know what you were doing in the bank or credit union?

It doesn’t…usually.

It’s all about how those hard and soft inquiries are coded within the credit reporting agencies’ systems.

If your bank or credit union inquiries are coded with the words “Credit Card” (e.g. Bank of America Credit Card)…they’ll each count as hard inquiries and could lower your credit scores regardless if they were in the magical window of opportunity or not, because they are clearly coded as credit card inquiries.

However, if the inquiries are coded with just the name of the bank (e.g., Bank of America)…you have a chance to have these inquiries included within the magical window of opportunity…simply because FICO’s scoring model may not be able to tell what these inquiries were for, so it errs on our side. Whew. The little guy gets a break!

This would mean multiple mortgage, auto, bank, and credit union credit inquiries within the 45-day period would all be counted as one inquiry against your scores.

Pretty nifty, huh?

Try to group all of your mortgage, auto, bank, and credit union inquiries within the same 45-day window and you have the best chance to keep your scores higher.

Keep smiling,

Stephen's Signature

Copyright 2013 LifeAfterBK. All rights reserved.
You are receiving this email because you signed up for email updates from LifeAfterBK

Our mailing address is:
Life After BK
14074 Trade Center Drive
Fishers, IN 46038

A little background about LABK…

I first started writing this newsletter in 2005.

I have 207 issues coming your way every Friday morning that have been updated for 2013.

At the rate of an issue each week I think you can become a master at recovering from bankruptcy in no time.

The entire experience will take two years to read.

I know that LABK will be some of the best training you will ever be exposed to.

This free newsletter is going to ROCK YOUR WORLD.

Sign Up Now!

Privacy Policy Terms & Conditions