NJ First-Time Home Buyers

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Credit Scoring - Inquiries (6 of 6)

man on phoneI feel like a broken record, but Inquiries are one of the most misunderstood factors of the credit scoring model. Inquiries count for 10% of your overall credit score.  An inquiry is a check on your credit.  There are two types of inquiries, soft and hard. 

  • A soft inquiry is one that does not hurt your score.  Such examples are job credit checksinsurance checks, or credit card "pre-approved" offers.
  • A hard inquiry is a credit check that does put a ding on your score.  Such an example would be a credit check by a mortgage lender, an auto dealer, or a credit card company in certain situations.

Now to let the cat out of the bag ...

You have 45 days to have a mortgage lender (or auto lender) check your credit and have it only count as one inquiry.  This is completely contrary to what many loan officers will tell you.  Why is that?  First off, many loan officers don't educate themselves as true professionals.  But that aside, they don't want you shopping them.  So they put fear in your mind that if you check with other lenders and have them run your credit, that "you may not qualify anymore". 

Now it is true that multiple credit checks will bring your score down.  But that scenario would be when you are doing things like shopping for a car, and opening credit cards, and other credit checks at the same time.  The 45-day window is understood in the credit scoring model since it "allows you" to shop for better terms without killing your credit score.

A credit inquiry on average hits your credit score for 5 points, however it can hit it for anywhere from 2 points to 50 points.  You heard me right.  Why is this?  The credit scoring model has 1,000's of profiles that it uses to judge and create a credit score from.  Based off of statistics, people who are getting their credit checked very often, are those in financial trouble.  Hence having credit checks often can bring your score down as you are viewed as high risk.

Other Notes

  • Only the first 10 inquiries count each year
  • After 10 inquiries, they will not affect your credit score
  • Check out www.annualcreditreport.com to obtain a free copy of your credit report.  A PERSONAL check will not affect your score.

The topic of credit scores, the credit scoring model, and credit restoration always have a plethora of myths, misconceptions, and just a ton of questions. As you or someone you know comes across a situation that is confusing, or that you want to be certain that you handle right, just e-mail me.  I'll be happy to help out.  ~ Steve Kappre 

Credit Scoring – What Makes Up My Credit Score?

Credit Scoring – Payment History (2 of 6)

Credit Scoring – Balances (3 of 6)

Credit Scoring – History (4 of 6)

Credit Scoring – Mix of Accounts (5 of 6)

Credit Scoring - Inquiries

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Treasury Mortgage - 550 Bridgeton Pike, Mantua, NJ 08051 - 1810 Springdale Road, Cherry Hill, NJ 08003

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Comment balloon 1 commentRichard & Carol DeGrace • October 30 2008 08:38AM
Credit Scoring - Inquiries (6 of 6)
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I feel like a broken record, but Inquiries are one of the most misunderstood factors of the credit scoring model. Inquiries count for 10% of your overall credit score. An inquiry is a check on your credit. There are two types of inquiries, soft… more
Credit Scoring - Mix of Accounts (5 of 6)
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One of the 5 main catagories in the credit scoring model is the mix of credit accounts. The mix refers to different accounts such as mortgages, auto loans, installment loans, and credit cards. A person's mix of accounts represents 10% of their… more
Credit Scoring - History (4 of 6)
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Your credit history accounts for 15% of your total credit score. History does not refer to payment history. History is the evaluation of the timeframe that your accounts have been open and active, as in how many months or years. Longer… more
Credit Scoring - Balances (3 of 6)
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One of the most misunderstood areas of a credit score is the "balances" part of scoring. I say that it is misunderstood not because it is complicated, but because people tend to have no idea why their credit score is low, when in fact… more
Credit Scoring - Payment History (2 of 6)
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The most important factor regarding your credit score is your payment history. Your ability to pay your accounts on time reflects 35% of your credit scores. The credit scoring model certainly wants to know that you are paying your accounts as… more
Credit Scoring - What Makes Up My Credit Score? (1 of 6)
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I've worked with clients all across the board. Some who had "perfect" credit, and some who upon seeing their credit report, found themselves a second job (fixing their credit). I'll help you understand what makes up a great credit score,… more
Collection Accounts and New Car Loans - Did YOU know?
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I just finished another one of my Credit Scoring Seminar classes tonight, and after countless times doing this, I still chuckle. Where do people get their knowledge of credit scoring? This specific class was great and intelligent so this isn't… more
Updated First-Time Home Buyer Rates for NJ (Again)
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New Jersey First Time Home Buyer program rates have changed, again. I hosted a very similiar message just over a week ago. In the past these programs would only change every so many months. Not only that, but these rates were usually lower than… more