That said, the credit industry understands the importance of comparison shopping for auto loans and mortgages. In fact, most lenders want to encourage shopping—since it increases the chance that you’ll give them a try. So, some changes to credit scoring models make in the 1990s and 2000s take into account the likelihood that a smart borrower may generate multiple inquiries along these lines. Under the FICO scoring model, it doesn’t matter how many inquiries for an auto or home loan that you generate in a 14-day period. They all count as a single inquiry. What’s more, your score does not include any mortgage or auto loan inquiries that were made in the 30 days prior to scoring. So, you’ve essentially got 44 days to get your act together. Once you’ve started filling out applications and generating inquiries, remember: The clock is ticking.

New credit is one of the factors used to determine your credit score. In fact, new credit accounts for 10 percent of your credit score. Hard inquiries are considered a subset of the new credit category. According to Fair, Isaac & Co., the information about inquiries that can be factored into your FICO score includes: the number of recently opened accounts that you have and the proportion of accounts that are recently opened compared with long-standing accounts, by type of account; the number of recent inquiries; the time since recent account openings, by type of account; and the time since you last had any credit inquiries.

Throughout this book, we recommend that you shop around for credit-a new credit card, a home loan or an auto loan. But how you shop around can affect your credit rating. The issue is whether or not a potential lender or credit card provider requests ("pulls" in industry jargon) your credit report. Every time one of these companies pulls your credit report, it counts as a "hard" inquiry. And hard inquiries lower your credit score. One way to be sure you're getting information-and not having your credit report pinged at the same time-is to withhold your Social Security number until you're ready to make a decision on a lender or credit card company. Unfortunately, this can be tricky-especially when you're shopping for credit on-line. Most on-line lenders require you to provide your Social Security number before they will quote an interest rate, since interest rates are closely tied to credit scores. And when you provide this information, you are applying for credit-and that gives the lender your permission to check your credit report.

Some potential employers may have a reasonable need to check out your credit history, but insurance companies? Where is their need? As it turns out, your credit rating and your driving record probably are completely unrelated. But auto insurers have found that your likelihood to pay your credit card bills is closely related to your likelihood to pay your insurance premiums. The same holds true for other types of insurance, too, including life insurance. However, many states are looking unfavorably on insurers’ use of credit histories in underwriting. Washington, Utah, Idaho and Maryland have already passed laws restricting insurance companies’ ability to do so, and many more states soon may follow suit.

Why would employers want to view your credit report? Perhaps you’ve applied for a job at a bank or someplace else where you will be handling money. Perhaps you’ve applied for a high-security job, where you will have access to valuable information. Or perhaps you’re going to be working with other valuables—such as jewelry, stock certificates or bonds. In all of these cases, the employer or potential employer wants to be certain that you are responsible, not desperate for money. After all, if you’re desperate and you’re surrounded by temptation, you might take advantage of the situation. Employers and potential employers do receive a different version of your credit report than the one that goes to potential lenders. It’s usually less detailed, with regard to your credit history; and it doesn’t count as an inquiry on your credit score.

You might think that your credit report is confidential. Yet, while the information contained therein is pretty darn personal, it's by no means a secret. A variety of people or companies can look at your credit report, as long as they have a "permissible purpose," as defined by the Fair Credit Reporting Act. This variety includes: potential lenders; credit card issuers; potential landlords; banks (e.g., when considering offering you overdraft protection or while setting your ATM cash withdrawal limit); insurance companies; employers and potential employers (though only with your written consent, in most cases); government agencies (although they may only view portions of your report); a company you hire to alert you to signs of identity theft; some groups considering your application for a government license or benefit; someone who needs to access your report in order to provide a product or service you ordered; a state or local child support enforcement agency; and anyone else who has your written permission to access your credit report.

Many people make the mistake of assuming that credit bureaus exist to serve individual consumers-and get frustrated with the lack of responsiveness and customer service that the credit bureaus have traditionally offered. If you remember that you're not the credit bureau's primary customer, you may understand the cool reception the credit bureaus give you. The problem with this approach to the handling of credit information is that it accepts a higher level of inefficiency than most consumers would like. In this way, the credit industry is something like the health insurance industry-in both cases, the primary customers (lenders, in the case of credit bureaus; employers, in the case of health insurance) are not the end-users of the services being sold. An economist looking at this system would likely conclude that it's not intended for efficiency, if efficiency means timely and accurate exchange with the greatest number of users. Industry insiders claim that the inefficiency makes credit information hard to manipulate and-in theory-more reliable. For lenders.

The process to fix errors on your credit report sometimes can be long and frustrating. And it is possible that you will need to apply for credit before all of the errors are resolved. In this case, you’ll want to provide copies of your correspondence with the credit bureaus and supporting documentation along with your application for credit. Be as thorough as possible; most of the time, lenders won’t be convinced by your documents unless they are detailed and clear. You have a lot of skepticism to overcome.

One reason we recommend contacting the credit bureaus directly to receive copies of your credit reports is because there are numerous scam artists on the loose who are "phishing" or "carding"-in plain English, looking for credit card information. One way they do this is by setting up Internet Web sites. There, the scam artists offer cheap or free access to your credit reports as a way to lure you into giving them your information. What are they phishing for? Anything that can help them pretend to be you. They want your: credit card numbers; bank account information Social Security number; passwords; and other sensitive information.

Start off by making a copy of your credit report. Keep the original in a file that eventually will contain all of the documentation regarding the error. On the copy of your report, mark the error. Send this to the credit bureau, along with the dispute form that you should have received with your report. If you don't have the dispute form or don't want to use it, it is always acceptable to send a letter instead.