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Credit Inquiries and Medical vs Non-Medical Collections
Why do lenders want to see inquiries from only the past 90 days of the credit report ? Why do mortgage companies treat medical collections the same as non medical collections
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Knowing what credit inquiries are and understanding medical and non-medical collections’ impact on reports will help you manage your credit score. Let’s dive into the details:
Inquiries
Types of Credit Inquiries
We can distinguish two types of credit inquiries: soft and hard inquiries.
Hard Inquiries: As a rule of thumb, hard inquiries can affect your score when a borrower applies for a mortgage, a credit card, or a loan. For example, this occurs in the auto loan application when the lender checks the credit report. Due to the enhanced risk of mortgage lending, lenders prefer to cut down on fraudulent applications. These inquiries have lasted for two years and are included in your report.
Soft Inquiries are opposite in their function. They occur when no consultation is done or when you’re considering an offer. For instance, attempting to obtain a loan with a particular institution for the first time… This type of inquiry does not affect your score.
The effects of credit inquiries:
In this case, the impact is relatively small, which is a few points—hard inquiries do affect your score, but this effect tends to wear off over time. Suppose a person applies for a car loan simultaneously but within 30 days. In that case, several people ask for similar loans, and the organizations offering the loans may interpret this behavior as loan shopping, only allowing it to be treated as a single request.
Implications of a Credit Record for Medical and Non-Medical Collections
Medical collections—Negative medical debts require a different approach to a reserve credit score, especially if you toe it down on their settlement or payment, as it is likely to be less damaging.
Moreover, in some scoring evaluation models, such as VantageScore 3.0 and FICO 9, once medical debts are sorted, they’re completely ignored from the credit report. Getting rid of debt or settling a collection should decrease the risk of incurring further debts.
Non-Medical Collections:
This may include credit card debts, personal loans, utility bills, and other non-medical debts. Unpaid non-medical collections can damage your credit score.
Usually, it’s in this time period that they are likely to affect your credit score as they are still listed in your report. This effect is understood to last for a duration of up to 7 years.
Best Practices
Check Your Credit: Check your credit reports periodically to look for errors and confirm that all the data is accurate.
Pay-Off Collections: The same goes for collections, non-medical ones in particular – paying them off either boosts your score or removes them from your history.
Negotiate with Creditors: Contact your creditors if you still have unpaid collections. They may be willing to remove the collection mark from your report if you pay them a specific amount—they call this concept “pay for delete.”
Reduce Hard Inquiries: Avoid having hard inquiries and applying for credit without needing to do so.
Understanding the difference between medical and non-medical inquiries and their effect on one’s credit score can come in handy in maintaining a promedio strive or a better one. Do your best to clear up collections, don’t apply to excess credit, and always be sure to revise your report close. If you have any questions about the topic or require assistance, please ask!