What Happens During a Credit Inquiry

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What Happens During a Credit Inquiry?
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• It might seem like everything these days requires
  a credit check - a new cell phone, a cable
  account, an apartment, a new job. In fact, for
  many Americans, it might seem like even the
  phrase "credit check" should come with a stack of
  legal paperwork, but what exactly happens when a
  business checks credit score and leaves behind a
  credit inquiry?

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You immediately pass or fail

• The first thing that happens when a credit
  inquiry takes place is that your credit score is
  revealed, and most lenders have a system to
  generate an automatic pass or fail based on their
  own credit inquiry requirements. Not all
  companies require a perfect score, so even if
  your credit score is low, you might still pass if
  its higher than this number.

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You pass, and your file is reviewed

• Maybe you have okay credit, but what does the
  rest of your file say about you and any potential
  financial problems you might have? Maybe your car
  is six payments behind, or your credit card is
  maxed out. Because credit bureau updates aren't
  instant, you can have a good credit score but a
  terrible credit profile which (during a credit
  inquiry) will tell your lender that ongoing
  financial problems are going to turn your good
  score sour.  
• Remember, what your lender is mainly looking at
  during a credit inquiry is if you do or dont
  have large debts or the potential to have large
  debts (i.e. 3 brand new credit cards with no
  spending history) as each of these credit
  surprises can spell problems later on.

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You pass the review, and your DTI gets checked

• During your credit inquiry, a responsible lender
  will add up the minimum payments on all of your
  debts including co-signed debts and divide it by
  your income to get your debt-to-income ratio
  (DTI). The higher the DTI, the more risk you are,
  because even if you make 5000 per month, if you
  owe 4900 you dont have a lot of wiggle room.  
• Remember, most of the time credit inquiry still
  relies on the human element, and in order to rule
  out clients with financial problems, businesses
  are reviewing you by hand which is why is pays to
  keep up with your payments and remove unwanted
  inquiries with the help of Inquiry Busters.

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