Credit report inquiries are used to calculate 10 percent of your credit score. Might not sound like a big percentage but it makes a big difference for a debtor exiting bankruptcy and trying to rebuild their credit. That's why post-bankruptcy debtors need to understand how credit inquiries impact their score and what they can do to minimize the negative impact.
Below are a few tips and bits of important information:
- There are two types of credit inquiries. The first type, a "soft" credit inquiry is when a creditor, employer or landlord simply pulls your credit report to have a look at your history. In other words, you aren't actually applying for any credit. Soft inquiries have no impact on your credit score. The second type of creditor inquiry, a "hard" inquiry does have a negative impact on your credit score. That's why when a post-bankruptcy debtor applies for multiple credit cards in a short period of time they see a drop in their score. The logic? It is assumed that you may be desperate for credit and therefore a credit risk.
- The good news is that the credit score drop is not calculated in the debtor's score until after 30 days. That means that for the first 30 days after the first "hard" inquiry, the debtor's credit score will not be negatively impacted.
- Post-bankruptcy debtors on the hunt for a credit cards, a mortgage or car loan need to carefully plan their search so that they can find the best deals and apply for only those credit lines they want in a 30 day period.
- Even though the post-bankruptcy debtor's credit score with be impacted by the hard inquiries, it will only have an impact for 12 months.