How much does a hard inquiry drop my credit score?

Your Credit Minute Show Notes:

00:01 What’s up YouTubers, this is Nik Tsoukalis from Key Credit Repair. Today, I’m going to address something very serious. Something that, for many of you, has made you quite sad. Hard inquiries. Okay? Some of you think this is devastating, this is the end of the world, you know? First, let’s talk about what is a hard inquiry. A hard inquiry is not when you check your credit score online, it’s not when you’re going to Credit Karma, or Privacy Guard, or Smartcredit. com. Anytime you’re checking your credit score for the purpose of credit education, credit monitoring, it does not hurt your credit score. A hard inquiry is a record that’s placed against your credit report when you are checking your credit for the purpose of blending, for being extended credit. Okay?
00:48 And the question I get all day long is how much is my credit score going to drop if I have my credit checked? How much, how much, how much, how much, how much? Is my credit going to be destroyed? Is my credit destroyed? I’ve already checked my credit a few times with a few banks, is it over? Am I never going to get approved for something again? And the short answer to that is you are insane. You are insane. Stop listening to this craziness that hard inquiries are destroying your credit. It’s just false, it’s wrong, it’s totally not true.
01:25 So let’s elaborate a little bit on this. So I’m going to reference my boys over at myFICO. com. If you’re not sure or not aware who FICO is, it’s Fair Isaac Company. Do you know those guys that invented credit scores? They tell us how inquiries affect your credit score. So I’m going to share this article below in the comments, but in the credit education section of myFICO.com, you can actually search inquiries, and it’s the first question that’s up there, and I’m going to read it off to you guys. Okay? If your FICO scores change, they probably won’t drop much if you apply for several credit cards within a short period of time. Multiple inquiries will appear on your credit report. Looking for new credit can equate with high risk. Okay? But that’s not definitive.
02:16 But most credit scores are not affected my multiple inquiries from auto, mortgage, or student loans lenders within a short period of time. The short period of time is not defined. Guys, I’ve been doing this for 15 years, looking at credit reports for a long, long time. I’ve probably looked at, I don’t know, a hundred thousand credit reports, a couple hundred thousand credit reports. It’s almost absurd at this point. I can read these things, I can use ESP to probably tell you what’s on your credit report. I’ve seen so many of these things. The short period of time, I’d probably say 60 to 90 days, okay? If you’re shopping around for something like a mortgage and you want to check out a few different banks and lenders, you want to do a little rate shopping, okay? Keep in mind, to get a proper quote, they need to check your credit score. Don’t be afraid of doing this. It’s not going to hurt your credit score.
03:13 FICO has told us, not just in this article but in multiple articles, that rate shopping increase are okay. So those hard inquiries, although they will appear on your credit score or your credit report, they’re not going to drastically drop your credit score. In fact, you may see absolutely zero drop in your credit score. In my experience, I have yet to see a credit report have any adverse effect, or credit score have any adverse effect from a hard inquiry. Guys, over a hundred thousand credit reports easily with my eyes closed, and I have never, ever seen a credit score drop because of a rate shopping inquiry.
03:53 Okay, you’re shopping around for a car. Go nuts, go do what you need to do. You’re an educated consumer. Mortgage, go nuts. Shop for five, six banks. You have to. You’re trying to get a good deal. Guys, if you’re getting a mortgage, you’re talking about a 30-year commitment, and you’re worried about your, the hard inquiry affecting your credit score? You’re talking about paying back a bank over 30 years. It could be millions of dollars in interest and you’re worried about the hard inquiry or maybe the 10 bucks you’re going to spend to check your credit report? It’s insane. Same thing with a car. You’re paying back that car loan over the course of 5, 6, 7, sometimes even 10 years, that’s a lot of interest, so you got to make sure you’re getting a good deal.
04:33 Um, now, for the first part of this, this answer, um, keep in mind, erratic behavior on your credit report could have an adverse effect. So, um, let’s say you decided to check your credit report a couple times with a credit card company, a couple times with the student loans company, a couple of personal loans, a couple of car loans, five or six mortgages, a few personal loans, and you did this all in one day. Okay? The credit scoring formula is designed to assess risk, okay, to protect future banks and lenders from making a wrong decision in terms of extending you credit, okay? So rightfully so, you could see a drop in your credit score. That’s a red alert. You are now a red alert, okay, maybe you’re a flight risk, maybe you’re about to leave the country forever and ever.
05:25 I’ll give you an example. You’re about to leave the country forever and ever, you’re never coming back, and you decide, hey, right before I head out of this place, I’m going to go nuts. I’m going to buy a bunch of stuff, I’m going to get a Macy’s card, a Target card, a Walmart card, a few personal loans, a few car loans. I don’t know what you’re going to do with a car loan. A few lines of credit, and you’re going to go crazy. You could be considered a flight risk, and that’s the only case where you could see a drop in your credit score. And I have to tell you, that is extremely rare. I’ve never seen it before, but that’s what we’ve been told by FICO on numerous occasions.
06:03 So guys, hard inquiries, if you’re doing it for the right reasons, don’t be scared of it. Do it, trust your lender. They know what they’re talking about guys, and they’re not going to drop your credit score. Okay? Um, and I’m going to squash one more misconception or one more myth, okay? Or make you guys aware of something. If you’re monitoring your credit score online, you’re on a Credit Karma, you’re on a Privacy Guard, you’re on a ScoreSense, you’re on any of these websites, keep in mind, most of these websites are not using the Fair Isaac Company Scoring method that banks and lenders use, which is typically a, kind of an older version, which is like FICO 4 or FICO 5, okay? These are 20-year-old scoring formulas. They’re using things like VantageScores, um, Credit Plus scores, those scoring formulas are not used by banks or for educational purposes only, but they’re also for marketing purposes.
06:54 So they have an incentive to tell you that the world, um, is going to be over because you just had an inquiry. And the incentive they have is when they send you an email saying you just had an inquiry, red alert, login to the website, check the app. They’re going to offer you something. You’re going to login to the app, that’s the bait to get you to login to their app, and when you login to their app, what’s there? There’s a banner for a credit card, there’s a banner for some sort of marketing affiliation they have, there’s a banner for something, and they’re making money on those offers. Because most of these credit reporting companies, what are they? They’re marketing companies, they’re marketing platforms. You get your credit report and score for free, you login, every time you login, they’re marketing something to you. They get your data, they’re reselling it to companies, all this jazz, okay?
07:44 So they really, uh, have been pushing this inquiry myth in a big, big way, to get people to login to their websites. Red alert, you’ve had an inquiry, the world is over. Um, new world order is taking over because of inquiries. Login quick, we will save your life. It’s false, it’s a lie, it’s garbage, okay? So guys, in terms of inquiries, that little frown, let’s turn it upside-down. Why don’t we do this together. Okay? Let’s smile. Do your job, do your rate shopping. Guys, this is Nik Tsoukalis with Key Credit Repair. Thank you for checking out our Credit Minute. Subscribe up here, down here, depending if you’re on Facebook or YouTube. Check us out for a free consultation, our staff is standing by, and have an amazing day. See you guys.

Credit Tip Of The Week: Credit Score Breakdown

Credit scores range from 300 to 850, with 850 being the best possible credit score. According to FICO, five different categories of information are used to calculate your credit score: Payment history, credit utilization, length of credit history, mix of credit and new credit.

Payment History

Your payment history is based on the payments you have made to credit accounts in the past. It is the single most important factor used in determining your credit score and accounts for 35 percent of the overall result. Account types considered in this part of the calculation include mortgages, auto loans, retail accounts and credit accounts. This part of the calculation also includes judgments, foreclosures, bankruptcies and other serious financial issues.

Credit Utilization

“Credit utilization” refers to the percentage of your available credit that is currently in use. The higher this percentage is, the more your credit score will drop. Using a large percentage of your available credit is considered poor debt management, and potential lenders see it as a warning sign that you may have trouble making payments if they extend you more credit. Credit utilization accounts for approximately 30 percent of your credit score.

Length of Credit History

The length of your credit history shows lenders how long you have been using credit. This part of the calculation considers the age of each of your accounts individually, as well as the average age of all accounts. The longer your credit history, the higher your score will be. Length of credit history accounts for 15 percent of your credit score.

Mix of Credit

In general, it’s best to have a variety of credit types, along with some accounts that are not currently in use. Different types of credit considered include installment loans, mortgage loans, finance accounts, retail store accounts and credit cards. Your mix of credit accounts for 10 percent of your credit score.

New Credit

FICO reports that opening several new accounts in a short period of time indicates a higher credit risk. Thus, if you open multiple new credit accounts quickly, your score may fall. New credit accounts for the remaining 10 percent of your overall score.

How to Pay Down Holiday Debt ASAP

Pulse racing? Head pounding? Anxiety starting to surface?

No, we’re not talking about the hangover you may or may not have woken up with on New Year’s Day morning, we’re talking about what you felt when you took a look at your recent credit card statement. You know, the one with all of your holiday purchases on it.

Even despite a shorter holiday shopping season from Thanksgiving falling later on the calendar in 2019, holiday sales increased about 3.5 percent this year compared to one year ago, while ecommerce sales increased to the tune of nearly 19 percent from the previous shopping season. If you followed this trend, it likely meant spending beyond your means. But now that the realization has set in, it’s important to not let this holiday debt linger, and for a few reasons:

Your holiday debt is likely revolving debt, that is debt that consumers aren’t obligated to pay off each month. In fact, credit card companies don’t want you to pay off your balance monthly because they earn more off you in interest the longer it takes for you to pay it off.
It could be hurting your credit score: Holiday debt could impact your credit utilization ratio, or your balance versus your total credit limit. Usually, you want to keep this at or below 30 percent for the best possible credit score. For example, if you have a credit card with a $10,000 limit, you want to have a balance at or under $3,000 for a better credit score.

Like we said above, it behooves you to settle any holiday debt you’ve accrued as quickly as possible. Here’s a look at some tips on paying down your holiday debt to help you get it done:

Reel in Spending

Simply paying the minimum amount on your credit card isn’t going to pay down your holiday debt in the near-term, so we advise taking it easy in January so you can allocate more money toward your balance. Refrain from dining out, catch a movie on a streaming platform rather than go to the theater and skip the weekly after-work happy hour. Put what you save toward your debt balance.

Reduce Your 401K Contribution

If you’re contributing to a 401K each paycheck and you’re serious about paying down your debt quickly, we’d suggest temporarily decreasing your contribution and putting the excess money toward your debt. Just make sure that you’re disciplined enough to increase the contribution when you’ve paid off your holiday spending.

Combine Debts (if Applicable)

If you have debt on multiple credit cards, it may be worthwhile to look into combining your credit card debt at a lower overall interest rate so that you just have one — rather than several — monthly payments to make each month. Doing so can offer financial savings when it comes to the interest rate and make paying down your holiday debt and other payments much easier.

Reassess Monthly Spending

The new year is always a great time to reassess your monthly spending. Take stock of your expenditures and chart out what’s a necessity, what’s a luxury and what you don’t need anymore. Make sure you cut out anything that you don’t need anymore and think carefully about whether or not you need the “luxuries.” You might also shop around to see if you can save money on necessities like car insurance, homeowners insurance, cell phone plans, TV packages and more to see if there’s a better deal out there. When it comes to reducing monthly spending, it’s usually not just one thing, but several little things that can make a big difference in the end.

Fed Survey Finds Credit Card Standards Tightened in Third Quarter

If you want to get an idea on how lenders are predicting the economic future, look no further than the most recent survey from the Federal Reserve. Specifically, the survey noted that banks and credit card companies got stingy when it came to consumers opening new lines of credit in the third quarter of this year, something that typically happens during times of economic uneasiness. In fact, according to the survey, the underwriting standards for credit card approval have increased to a point that hasn’t been seen since 2009, and we shouldn’t need to remind you of the fragile state of the economy a decade ago, at the cusp of this generation’s great economic recession.

So what does this Fed survey indicate, exactly? In layman’s terms, it means that if you want to open a new line of credit, your credit score had better be in really good standing. In fact, the Fed survey specifically indicated that it’s gotten a lot harder for consumers with credit scores under 620 to get approved for new lines of credit compared to what it was at the beginning of the year when there was much more confidence about the economic outlook. The bottom line is that if your credit isn’t in good standing, banks are going to worry about your ability to pay back any loans or lines of credit that you’ve opened now in uncertain times than they would in prosperous economic times. As a result, they’re going to be more stingy about what they approve. And while we always recommend taking the appropriate steps to make sure your credit is in good standing, it’s going to be arguably more important than ever in the near-term if banks continue to tighten the strings on the money they hand out. The good news is that if your credit score is in good shape or you work to ensure that it’s in good shape, you’re likely to benefit from reduced interest rates.

How to Improve Your Credit Score

Even if your credit score isn’t below the 620 mark that we indicated above, it always behooves you as a consumer to take the necessary steps to improve it. Here’s a look at how you can get improvement fast so that you’re not on the outside looking in if you need to take out a loan or line of credit down the road:

Keep balances low on existing credit cards: Keeping balances low on any revolving credit that you have (i.e., credit cards) can help improve your score. Generally, expect your score to be highest if you’re at or below about 30 percent of your credit utilization rate. For instance, if your credit card has a limit of $1,000, you want to carry a balance of no more than $300 for the best possible credit score.
Ask for an increase in your credit limit: To piggyback off the above point, if you’re eligible for a credit limit increase that can help out your credit utilization ratio and thereby improve your score, consider taking it.
Check your credit report: This gives you an idea of where you stand and what needs improvement so you can come up with a plan of attack. It can also help you identify and dispute any inaccuracies that may be present on your report.
Negotiate away: Have outstanding balances or debt that’s gone to collections? That can really hurt a credit score. Try negotiating with the lender to settle any debts so that they appear more favorable on your credit report.

What To Do If You Don’t Have A Credit Score

It’s estimated that about 50 million American adults don’t have a credit score.

That’s right — not good credit, OK credit or poor credit. We’re talking no credit. And that can be a huge problem if you’re unable to pay for something like a car or a home with cash and need to take out a loan to finance it. No credit score means no loan.

There are a few reasons why you might not have any sort of credit history. Perhaps you’ve gotten into the habit of paying for everything with cash? Or maybe you’ve established lines of credit, but haven’t used them within the past two years? If you’re new to America, it’s possible that you haven’t established it yet. Whatever the reason, we’d strongly suggest you start establishing some credit roots immediately, as that three-digit number holds so much weight when it comes to your financial future. This post will take a closer look at how to establish credit with no credit score. Here’s a look:

Don’t Have a Credit Score? Do This!

No credit score? Here are some considerations for how to establish credit with no credit score:

Get a secured credit card: Think of these as credit cards for beginners. They work just like a credit card does, except you need to have a cash deposit to back up any usage. Usually, this cash deposit you put forward is the same amount as your credit limit. Secured cards work just as regular credit cards do for the most part. You can charge purchases and you’ll have a payment date to abide by. Any balance not paid in full is subject to interest. After you’ve dipped your feet in the water with a secured card, it’s usually pretty easy to take the next step to an unsecured one.
Get a retail credit card: Yes, you can get some nice perks based on the store that offers it, but the real incentive is that these are usually easier cards to get approved for — even if your credit is lacking.
Find a co-signer: If you don’t want to go the secured card route, consider asking a friend or family member if they’ll co-sign with you on a credit card.
Ask to be an authorized user on a family member’s card: Don’t want to go the co-signer route? See if someone will add you as a user on their existing credit card. This can be a great way to establish credit with no credit score because it is based on that card’s total usage, whether it’s you doing the spending or not.
Can your rent payments help you? Many landlords use rent-reporting services, which can help their tenants build credit, especially when it comes to making on-time payments. Not every scoring formula will take this into consideration, but many do.

Experian Offers Higher Credit Scores for Access to Bank Accounts.

Your Credit Minute Show Notes:

00:01 What’s up everyone. Nik Tsoukales here with Key Credit Repair. I’ve got some quick credit news for you, hot off the press from Housing Wire uh, yesterday morning. Um, we have Experian offering potentially high credit scores in exchange to access to people’s bank accounts, and a lot of people are wondering what this is all about. And a lot of people are wondering about some other news, that kind of coincides with this about having cell phone usage, or how you’re paying your cell phone, uh, affect your credit in a positive way.
00:28 So, in the past, what has always happened was if you’ve made your uh, utility payments on time, um, including your cell phone payments, it didn’t report to the credit agencies. But, if you wanted to default, it quickly reported as a collection. It’s probably the number one thing that we work on here at Key Credit Repair. But, you never got the positives from it, only the negatives if things fell apart. Well, Experian today, or yesterday, uh, announced that it’s releasing a new program called Experian Boost. Kind of an interesting little uh, little program. How beneficial it’s going to be, um, kind of up for debate, because it’s only Experian’s program. Obviously, we want to see all three credit agencies, and all three credit scores looking good. Experian, Trinity and then Equifax. But even so, this is a step in the right direction.
01:12 So essentially, what’s going to happen is you’re going to be providing Experian, and obviously this is an opt-in, you’re going to be providing Experian with your bank account information. Experian will then use some fancy software to log into your bank account and essentially analyze your transactions and look at things like utility payments, okay? They will then report those on-time payments to your utility companies, as well as your cell phone company, um, to uh, the Experian credit report. That will then get taken into account under their new FICO eight algorithm, and will potentially increase your credit scores.
01:45 Now, let’s say you’re not making a cell phone payment, or let’s say you stopped. You get a late. That’s one of the questions we’ve been asked today about this, and the answer to that is right now, probably not. What they’re telling us is if you stopped making a payment, maybe a payment’s not due, um, what’ll happen is if you stop making those payments, 90 days later the Experian Boost program simply will not take that account, uh, will not take that account into account. So, it will no longer report to uh, the Experian credit report, so keep that in mind. So, you shouldn’t be negatively affected. Obviously, if you miss payments for 90 days, it will then go into collections anyway, so you’ll get the negative ramifications of that then.
02:26 Um, some quick stuff. This is uh, for utility bills. Um, cell phones. Again, uh, if you stop paying, it will discontinue in 90 days. This is being used for FICO eight. Keep in mind, banks and lenders, for the purpose of mortgage lending, they’re not using FICO eight. They’re using FICO four. They’re using some prehistoric versions of the FICO algorithm. FICO eight is not the score of choice for home lending. And I say this, and I, and I warn everyone, because this is the credit score that our typical client is using to finance a home. Um, most of our clients are trying to buy a home eventually. They’re trying to become uh, homeowners from lenders, so it’s very important.
03:06 Um, also something to keep in the back of your mind is the fact that you are linking up your bank account information to Experian. Not to say that al-, already have everything on us, uh, they already have a lot of our data, but you’re also linking up your bank account information. So, they’ll have the ability to see uh, your spending habits, and where your money’s going, so that’s something to think about as well. Do we want to share that aspect of our finances with one of the credit agencies? We all know the credit agencies do resell data, okay? They’re big marketing company as well, so that’s another thing to keep in mind. Uh, guys, this is Nick Tsoukales with Credit News Daily. I’m going to include a link here for the text, or transcript of this blog. Feel free to read through it, and feel free to email us at info@keycreditrepair.com. If you have any questions on how this could adversely affect you, or even benefit you in the future. Thanks and have a great day.

Experian offering potentially higher credit scores in exchange for access to people’s bank accounts.

What is the Best Way to Manage your Credit Card Spending?

Your Credit Minute Show Notes:

00:00 Hey guys, credit question of the day coming from [Shanta Clark 00:00:03]. Thank you so much for sending us this message, um, and for giving us this post. So- so Shanta asked, “What’s the best way to manage your credit card spend?” Guys, the best way to manage it is to not use them. Call me old school. I’ve met a lot of rich people in the last 10 years and the general consensus is cash is king. Spend all the money in your pocket. Budget all you want, but if you can’t budget, don’t worry about it.
00:28 Save some money every week out of your paycheck. Um, and then if you wanna burn through everything else, burn through. Have fun spending it. Have a ball, okay? Let’s stay away from credit card debt. There shouldn’t be credit card spending. There shouldn’t be, uh, any credit card spending management. That shouldn’t be a tool. It shouldn’t be in system … It shouldn’t be a system. If you’re caught up in the points game, you’re dead in the water already guys.
00:52 So again, my suggestion … Um, Shanta Clark, again, thanks for your question, but my suggestion is stay away from the whole darn thing. It’s the number one wealth buster in the United States.

What’s the best way to manage your credit card spending?

How much money to save in case of an emergency?

Your Credit Minute Show Notes:

00:00 All right guys. Credit question of the day. And we’ll actually make this a finance question of the day, is coming from [Sherry Lynn White 00:00:06]. Sherry Lynn thank you so much for posting your question on our Facebook page and the question is: How much money should you save in case of an emergency? Well, let’s think about this. In 2008, I would have said a year’s worth. Why? Because when people lost jobs in 2008, it took a lot longer to get a job. Now, the economy is a little stronger, if you’re going to apply for another job, it might be a shorter time frame. So, I would say the minimum should be six months. Okay. You want to look at all of your monthly expenses, you should be able to jot this down on a small piece of paper, even a napkin. Jot down those expenses, times six, that’s what you want to have in the bank. Now, if you’re getting out of debt, I would suggest actually putting that to the side. Okay. The debt’s probably costing you 20 plus percent, get a $1,000 in the bank, just in case of an emergency, something breaks down, you got a car issue, you need to rent a car, something happens. Okay. And attack the debt, don’t worry about your reserve.
01:03 SO the order is, put a thousand bucks in the bank, pay off the debt, and then move to get six months reserves. And once you’re done with the six months reserves, then you want to start investing in putting money into retirement. Thanks, guys. Have a great day.

How much money should you save in case of an emergency?

Should you Pay off Debt Slowly or all at Once?

Your Credit Minute Show Notes:

00:01 Marlena Perkins, thank you for your credit question on our Facebook page earlier. And Marlena’s question is, “This would be a blessing. Is it better to pay off debt slowly or all at once?”
00:13 Okay. Real simple, guys. It’s just the numbers. If you’ve got the money in the bank, it’s earning .0015%, like literally nothing. Okay? Your money, uh, if you compare it to, or if you compare the interest rate you’re getting from the bank to the inflation, your money’s actually losing value in the bank. Your credit card company’s charging you 28%. Right?
00:36 So, your money’s sitting in the bank is costing you 28%. Okay? If you’re nursing credit card debt. So, should you pay it off at once if you have the money? Absolutely. Hell, yes. You better do it. Um, you will be fine if you want to leave $100.00 in your pocket just in case something happens between now and the next paycheck. Rock and roll, but pay off the debt. Don’t nurse it. It’s not your friend. Credit card companies don’t like you. They’re trying to get paid by you. Okay. So, get away from debt. If you need to pay it slowly, then what you want to do is start with the smallest debt, pay the minimums on everything else. Pay that sucker off and move your way up the list. It’s called the Snowball Effect, but we can talk about that another time.
01:16 Have a great day, guys.

Is it better to pay off debt slowly or all at once?

Is it Okay to only Give the Minimum Payment on My Credit Card?

Your Credit Minute Show Notes:

00:00 All right, guys. Credit question from Paige, Paige Majelki. I’m sorry if I butchered your name, Paige, and the credit question of the moment is, is it okay to only pay the minimum payment on my credit card? And, I’m going to give you- I’m going to- I’m going to use a curse word. Hell no.
00:19 Guys, if you’ve read the disclosure, if you’ve read your credit card bill, you’re going to see there’s a little disclosure box that shows how much you will pay back and how long it will take you to pay off a credit card, um, if you only pay the minimum payments. And, you know what the average is ladies and gentleman on a $2,000 credit card? 18 years. 18 years because you bought a coat. That’s insane.
00:45 So, the answer is hell no. Even if you have to send in a dollar extra, you need to do it guys. You cannot maintain these balances. You- You cannot send in the minimum. You can’t nurse these things. They’re not your friend. If you have too many credit cards or you have to list them out on a spreadsheet, you’ve got a problem. You cannot organize credit card debt. It’s debt. It’s the devil. Get away from it ASAP.

Tag: Credit Score

How much does a hard inquiry drop my credit score?

Your Credit Minute Show Notes:

Credit Tip Of The Week: Credit Score Breakdown

How to Pay Down Holiday Debt ASAP