Mortgage Insights Blog

Part 5 of our 5 part series: It's surprising how many consumers make the same credit scoring mistakes over and over again. In an effort to educate consumers on credit and credit scoring, we've compiled 5 common credit scoring mistakes into a list that defines each mistake and explains why they are bad and how to avoid them. We will be releasing one per day. Here is:

Credit Mistake #5: Excessively Applying for Credit

Whenever you apply for credit your application gives the lender permission to access your credit reports. When they pull your credit reports, it automatically posts an inquiry in your credit record. This inquiry is a record of who pulled your credit report and the date it occurred.Â

Credit scoring models use inquires to determine if and when you shop for credit. Statistics show that consumers who have more inquiries are higher credit risks than those with fewer inquiries.

It is for this reason that the more inquiries you have, the more points you lose in the credit score calculation.

The exact point value of inquiries is a much argued topic and is impossible to give an exact point value because it really depends on all of the other information included in your individual credit file.

The best strategy would be to only apply for credit when you absolutely need to.

This means that you should avoid those in store offers of "10% off" in exchange for applying for a store credit card. This may sound like a great idea but the reality is that while you may save a few bucks on your purchase, those inquiries could end up costing you a lower credit score which could result in higher interest rates on auto or mortgage loans in the future.

Summary of the 5 Biggest Credit Mistakes

• Closing Credit Cards Accounts
• Missing Payments
• Settling Accounts
• High Revolving Utilization on Your Credit Cards
• Excessively Applying for Credit

There you have it. Now that you know the top 5 credit mistakes, you can avoid making the same mistakes that so many other consumers make. I hope this infromation was helpful to you and please feel free to pass it along to someone else you maight think may benefit form this insider knowledge.

Please feel free to respond back with additional questions or concerns.