A reader went car shopping several weekends ago and now sees that several inquiries from different lenders were posted on his credit report. He is aware that the credit scores apply special treatment logic to auto-related credit searches to accommodate for rate shopping. What he wants to know is, how he can be sure that these inquiries are coded correctly so that his credit history isn’t unfairly punished by his comparison shopping?
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Well, the credit bureaus create and issue unique subscriber codes that each lender or auto dealer uses when they make an inquiry into the credit bureau’s database to access an applicant’s credit report. The subscriber code contains a series of characters that identify the user (the lender using the code to pull the credit report) along with other information.
Within the subscriber code is information that identifies the type of industry that subscriber code represents. For example, the subscriber code could identify if the intended use is to pull credit reports for a cell phone application review versus a credit bureau report associated with an automobile finance application.
The credit scores incorporate logic to identify those codes that are likely associated with a mortgage, auto or student loan credit request and subject these codes to be included in their special inquiry treatment logic. The exact coding that the credit score developers include in their special inquiry treatment logic is not disclosed – they usually consider that proprietary information.
While it is a fact that searching for new credit is a predictive factor of future credit risk and can affect one’s credit score, it is important to remember that, generally speaking, inquires have a relatively small impact on the credit score. So don’t worry much about trying to decode or analyze these individual inquiries. Paying bills on time and keeping debt levels low are what dominate the score most heavily.
Image: sludgegulper, via Flickr