true of false?

[Cobster]

a friend at work told me that everytime you have to get a credit background check, you lose points or something along those lines?

essentially, it doesn't help your background, but in fact hurts it.
for every check, you lose a point which is equivalent to 3months of not paying a visa bill or statement?

something like that was what i was told.

this true?

 

[2fast]

Untrue.


What he's likely confunsing is the fact that too many credit checks in a short time frame may raise a red flag for a potential creditor and cause them to refuse you credit.

They do not harm your credit report as late payments would.

 

[UMustang]

Partially true.

Everytime someone does a credit check, a record of that check is placed on your credit history. Points are added to your credit score, which is not good. However, there is no way that it would be equivalent to missing three credit card payments. Trust me, when the banks mess you up, they REALLY mess you up (they'll hit you with an R7, which is the worst of the worst)

 

[tboy]

Plus, there is the fact that if you have multiple financial institutions doing credit checks, that may mean you have the possibility of upcoming loans. While you may not have the loans actually in your hand yet, when looking at your file the lender may think, hmmm how many loans is he getting???

 

[Bobzilla]

Partially true.

Trust me, when the banks mess you up, they REALLY mess you up (they'll hit you with an R7, which is the worst of the worst)

Actually, an R9 or I9 is actually the worst rating. The R stands for revolving credit, like a credit card, the I for installment credit, like a bank loan. The 9 refers to the fact that the account has been sent to a collection agency.

Apart from this, the original question is false, but others have raised a valid point by saying if there are too many inquiries, particularly by high risk lenders and/or collection agencies, red flags will be raised on the part of any prospective lenders/credit grantors.

 

[KBear]

Credit reports have a “Beacon Score” the higher the number the better. Part of the scoring section has prompts that could say things like, “too many inquiries, too many accounts”, etc. The Score would be used for doing a quick credit check when you are applying for a minor credit card like at the Bay, Radio Shack. When you apply for a major loan/mortgage the complete report would be considered by someone who is hopefully competent.

The inquiries likely do reduce the Score, but those R9’s mentioned are the real loan approval killers. High outstanding credit balances on multiple cards are also not good news.

 

[The Shake]

Just to add some additional context, this is basically a half-truth that some less credible lenders (e.g., a car salesmen who is trying to get you to use his financing) will use in order to discourage you shopping around for a better deal.

Having a few companies run credit checks on you as you are shopping for a mortgage, car loan, etc. will not raise any red flags. If you've suddenly applied for 6 credit cards and 4 loans in the previous month, however, that might cause concern for your lender.

 

[Leggy Linda]

not true!

 

[The Doctor]

Well it's a little know fact there Normy..ah...I mean CuteCob, but your friend is correct, kind of. When banks and other credit granting agencies evaluate your credit they use a system called the Beacon Score. This is a rating (out of 1000) of your credit history based on credit available and other credit activity. Every time you have a credit bureau run on you, the beacon score is reduced by a few points. Since the score is out of 1000 each credit bureau request does not have a significant effect on your overall score but excessive requests will add up. Most banks are happy with a score in excess of 620 and someone with a clean credit history scores in the 800 range (why it's out of 1000 then?).

This system is in no way related to the R ratings that you recieve for good or bad payment history, but is used as a tool to help evaluate the overall credit risk associated with an individual. If the score comes out low due to excessive credit bureau requests the agencie can override the score and make a manual note on your file.

 

[Mr. Downtown]

It all depends. The Snake can be correct if all the inquiries have occured over a long period of time. However, if you have been out shopping around to a number of Lender, each one of them running a CB, that could look bad on you. It gives the impression that you have to keep shopping your loan request because nobody wants you. As such, the Bank will think, "If nobody wants you, then why should we". Believe me. You have to bare in mind that Risk Management people are extremely anal types.

Same can be said for having a whole ton of existing credit facilities. Albeit, they may all be current R1 ect, you will be considered a credit hound and casts a less favourable impression on yourself.