With an outstanding credit score of 815, your adept understanding of hard and soft inquiries showcases financial acumen. Navigating loan shopping strategically, your consistent responsible credit management minimises the impact of inquiries. Continuous monitoring reflects your commitment, securing a strong foundation for future financial ventures.
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“I have finally reached an 815 credit score to buy a home, which is a huge accomplishment since I was at like 520 about five years ago, but my whole life, I’ve never missed one payment on any loans or credit I’ve had, and I’ve paid loans off early. In my 20s, I naively decided to shop around for a car loan in my attempt to find the best interest rates, and it wasn’t until I was approved I realised making inquiries damaged my credit score even though I was 100% paying all my loans off. They should really remove these types of inquiries.”
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Credit Inquiry Types:
Achieving an impressive credit score of 815 is a significant accomplishment, reflecting your dedication to responsible financial management. It’s essential to understand the two types of credit inquiries: hard and soft. While hard inquiries, resulting from loan or credit card applications, can have an impact on your score, soft inquiries, such as checking your own credit, have no effect.
Navigating Loan Shopping:
Shopping around for the best interest rates, particularly when seeking a car loan or mortgage, is a common practice. The credit scoring models acknowledge this behaviour, often treating multiple inquiries for the same type of credit within a short period as a single inquiry. This consideration minimises the impact on your credit score, recognising that consumers are actively seeking favourable terms.
Credit Score Components:
Credit scores consider various factors, including payment history, credit utilisation, and the mix of credit types. While inquiries play a role, their impact is relatively modest compared to other factors. Your consistent history of never missing payments, paying off loans early, and managing credit responsibly has been instrumental in achieving and maintaining a high credit score. As you continue this positive financial behaviour, the impact of inquiries on your credit score will further diminish over time.
Continuous Credit Monitoring:
Maintaining financial health involves regular monitoring of your credit report. You’re entitled to a free annual credit report from each major credit bureau, and checking your own credit is a soft inquiry that does not affect your score. This practice allows you to identify and address any inaccuracies promptly. Overall, your journey from a credit score of 520 to 815 showcases the success of your financial discipline and sets a strong foundation for future financial endeavours, such as home buying.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
