I pay everything on time, but my score is still low. Mortgage inquiries are hurting me. What can I do?
Your credit score is a direct reflection of all of the items in your credit history. Payment history is always the most important factor in credit scoring. Inquiries may have a small impact, but they are the least important factor in credit scores. Because of the special way in which mortgage inquiries are treated, they are not likely to have a significant effect on your credit scores.
When you order a credit score from Experian, you will also receive a list of the risk factors that are currently impacting your score the most. If you have no late payments in your credit history and your credit scores are still lower than you would like, focusing on those factors can help you improve you credit history, which in turn will increase your scores.
Credit Score Risk Factors
The list of factors affecting your credit score can vary over time, depending on your current credit situation. For example, if you've made a large purchase or are carrying substantial balances on your credit cards, your list of risk factors may include something like "balances too high on revolving accounts." This means that paying off your credit card balances will likely have a positive effect on your credit scores.
Inquiries Have Only a Small Impact on Credit Scores
You mentioned that you have mortgage inquiries that are hurting your credit score. While recent inquiries can have some impact on credit scores, that impact is typically small and temporary, especially if your credit history is otherwise strong.
When shopping for a mortgage loan or car loan, you may notice that multiple lenders have accessed your credit report as a result of one application. However, as long as those inquiries occurred within a certain period of time, usually 14-30 days, most credit scoring models will count them as one. The newest scoring systems from FICO and VantageScore will omit the inquiries for mortgage applications. This means you can shop around for the best rates and terms for your loan without being penalized.
Inquiries remain on your credit report for up to two years, but the longer ago they occurred, the less they will affect you. Generally, inquiries will have little or no effect on scores after a few months.
Improving Your Credit Score
If you are trying to increase your credit scores, making all your payments on time is a great first step. While each person's credit situation is unique, here are some other steps anyone can take to begin improving their credit scores:
- Pay off any past due accounts. If you have any past due items in your credit history, such as a charge off or collection account, paying off the past due amount can increase your credit scores and help you qualify for new credit.
- Pay down credit card balances. Credit utilization rate is the second most important factor in credit scores. It is calculated by taking the total of all your credit card balances and dividing that number by the total of all your credit limits. Although experts recommend keeping your utilization rate below 30% at a maximum, maintaining utilization rates of less than 10% is best for your scores.
- Sign up for Experian Boost™† . This free service that allows you to increase your FICO score instantly by adding your positive monthly utility and cell phone payments to your credit report. You will receive an updated credit score once you complete the enrollment so you can see how much it has increased.
You can find more information on how to build a stronger credit history on our blog.
Thanks for asking,
Jennifer White, Consumer Education Specialist
This question came from a recent Periscope session we hosted.
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