Too Many Recent Inquiries in the Last 12 Months |
By Kenneth Long on June 1, 2010
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Some consumers find that their applications for new credit are denied due to having too many recent inquiries in the last 12 months. If you have been denied credit for this reason, there could be a couple of underlying problems causing the lender to deny your application.
First of all, a lender may feel that you are desperate for new credit. Such desperation is a sign that something else has occurred. Loss of a job, a medical emergency or some other financial crisis could be prompting you to apply for credit so that you can temporarily continue to pay your other bills. Even if you fail to open an account, simply applying for credit lowers your score. Failure to open the account suggests that you were denied credit, even if the application was approved but you changed your mind.
Lenders also may balk if they feel you are hastily taking on new credit. Attempting to open many new accounts in a short period of time indicates that you are not using your credit wisely. A lender wants to see that you can handle your current accounts before attempting to open a new one.
Finally, lenders want to know that you will be using the account if it is opened. They incur certain costs to supply the account to you and want to ensure that their return on investment will be profitable.
Fair Isaac credit risk models reserve 10% of the credit scoring formulas for new credit. Attempting to open several credit accounts in a 12 month span is detrimental to your credit scores, since it indicates risky consumer behavior. Those inquiries actually remain on your credit reports for 24 months. Most of the damage associated with opening a new account is limited to the first year, with particular emphasis on the most recent 6 month period.
If you have received this error code in response to a credit application, understand that the lender is concerned that you are trying to take on more debt than you can handle. This is a well-documented risk factor that is incorporated in credit scoring formulas. The best response is to actually postpone future credit applications. Give your credit profile some time to heal. Focusing on other scoring components such as paying down your debt balances may allow your scores to increase more rapidly, clearing the way for new credit approvals down the road.
Join the Discussion at the Credit Forum: Too many recent inquiries in the last 12 months
Too many recent inquiries in the last 12 months is Code 8 on FICO-based credit scoring products. It is code T5 on NextGen scoring products. For more information on credit scoring, see the complete list of credit score factors.
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