Your credit score is one of the few data points in your life that you simply cannot escape. Whether you are attempting to buy a home, rent an apartment or obtain a credit card, the chances are good that your credit score will play a decisive role in the outcome of your efforts. Although maintaining a high-quality credit score is actually relatively simple, inadvertently damaging it can also happen quickly. Once your credit score has taken a hit, it may take several months or even years for your mistake to be erased. Fortunately, there are agencies and organizations in existence today who can help individuals who are seeking housing assistance with poor credit history.
When it comes time to buy a home, individuals with poor credit often find themselves at a significant disadvantage. Fortunately, a variety of federal and private organizations are dedicated to assisting these individuals in every step of the home buying process, including lending.
Factors Influencing Your Credit Score
Many adults are surprised when they see their credit score for the first time. This surprise can be equal parts pleasant and frustrating. The reasons for both upward and downward fluctuations in any person’s credit score are far more varied than most people realize.
As a general rule, any negative “strike” on your credit report will slowly be given less weight in the general score calculation as time passes. So, for example, if you have missed one or more payments on an asset such as your car or home and have been reported to a credit agency, you will likely see a significant drop in your credit score almost immediately. However, over the next several years your credit score will likely begin to rise again.
Late payments, which are commonly defined as payments that are more than 30 days late, will remain on your credit report for a period of seven years. While you may have had a spotless record on payments during this time, a online installment loans Mississippi single reported late payment will not only lower your credit score dramatically but also reduce the likelihood that leasing agents and other related organizations will look favorably on you as an applicant.
The Effect of Applying For Credit
Some financial experts have pointed out that even the act of applying for credit could have a negative impact on your credit score. This is due to the fact that the credit provider will be required to perform what is commonly referred to as an “inquiry” on your credit score. Every time a copy of your credit report is requested, this transaction is logged by the credit bureaus.
This does not mean to imply that applying for a single line of credit will adversely affect your score. In fact, applying for various credit lines over an extended period will typically have no real negative impact. However, the credit bureaus become increasingly suspicious when an individual suddenly begins applying for multiple lines of credit. Studies have shown that this type of behavior is commonly linked with personal financial trouble. This, in turn, creates a higher statistical probability of insolvency and default.
Understanding Hard and Soft Inquiries
When a credit inquiry occurs, it is commonly defined as either a “hard” or “soft” inquiry. A soft inquiry commonly occurs when credit lenders send you information in the mail regarding special offers, balance transfers, etc. and you opt to be pre-approved for those offers. When you choose to check your credit score this is also considered a soft inquiry. Employers also often perform soft credit inquiries for new hires.