Imagine you’re at a car dealership and you’ve found a new SUV that’s just perfect. It has everything you could want in a vehicle, and you seriously consider purchasing it. They run a quick credit check and tell you you’re clear to buy it.

But then you start to think about your kids, who will be in college soon and need help with tuition. You remember your friend who was laid off. And suddenly you hesitate. Perhaps this isn’t the perfect car. Perhaps you could get a used one that wouldn’t cost as much, or a smaller car to save money on gas.

You thank the dealer and tell him you’ll be in touch, that you need to think about it. And you leave.

Smart shopping, no? You can always come back, and in the meantime you have a chance to think it over and make a wise choice.

But that quick credit check from back at the dealership could hurt you in ways you hadn’t anticipated.

When you voluntarily allow a company to check your credit, it appears as an inquiry on your report. Inquiries are common, and happen whenever you apply for a credit card, car loan or mortgage. But when you decide not to get the credit, it can look on your report as though you were rejected; and when you have multiple inquiries, it can look like you are a risk.

Credit inquiries stay on your credit report for two years, although FICO only counts them for one year. (Note: Credit inquiries on yourself or by a potential employer do not appear on your report.)

The solution?

  •     Make sure to tell any sales reps or other people who might run a credit check not to do so until you are sure you’re ready to purchase. That way your smart shopping doesn’t have an effect on your credit score.
  •     If rate-shopping for loans and other purchases, do so in a short period of about 30 days.
  •     Take caution before applying for and opening new credit accounts.

Found yourself needing a way out from overwhelming bills or debts? Our attorneys can talk with you for free about your options and help you get a fresh start.

(Photo: barunpatro)