If you have ever pulled your credit report, you may have noticed inquiries that show up as “AR” or Account Review. Don’t worry–these don’t count against you as hard pulls.
So what are Account Review inquiries? In short, these are attempts by your creditors to invoke the universal default clause in your card holder agreement.
What is a Universal Default Clause?
Most major credit card issuers have added a clause into your card holder agreement in recent years. It is designed to allow the creditor to raise your interest rate if you appear to be a higher credit risk.
This universal default clause means that your rate may go up, even if you maintain a perfect payment history on that card. Your available credit can even be reduced.
All the creditor has to do is show that you are a higher credit risk. If you were late on another payment on your credit report, that could trigger interest rate hikes on all of your credit cards. This by the way also raises your minimum payments.
Creditors used to check your credit periodically, maybe every several months to check your creditworthiness. Now most major credit card issuers routinely check your credit almost every month. They want to know the minute that you become eligible for a new higher interest rate (default rate).
Remember to always make your payments on time. One late payment can ruin your financial situation, and it can even reverse those attractive balance transfer rates that you had.
If you have a late payment, be sure to ask for late fee forgiveness. Several late payments means your visit with a credit counselor is overdue.
I’m familiar with Account Review inquiries. In reviewing my credit report and credit score I’ve noticed that I’ve been ‘dinged’ for too many inquires’. when i look at the inquiries none of them are what I would deem consumer initiated. Several are from credit card companies with whom I have accounts and at least two are from collection agencies who appear to make an inquiry when moving my account from one agency to another. All of these inquiries suppress by credit score and seemingly trigger another round of inquiries. Is this right / legal? I thought existing accounts account reviews were soft inquiries and i have no idea how agencies repeatedly make inquiries when they shift accounts.
Dear Bob:
Is it possible that you ever requested a credit limit increase with one of your credit card issuers? This can actually be recorded as a hard hit as opposed to a soft inquiry. As far as the collections activity is concerned, that is a far greater impact on your scores than inquiries ever could be. Unresolved collections accounts are one of the biggest credit killers, only to be outdone by more serious items such as foreclosures, repossessions, judgments and bankruptcies. Any negative impact on inquiries will cure itself with time as long as you avoid applying for any credit accounts over the next couple of years.
To truly improve your scores, consider taking action to resolve the collection accounts. Whether you pay the balance off in full or settle for a lesser payoff, you can gain the most points by getting the collector to remove all negative information from your credit bureau reports. This is informally known as a pay for deletion agreement.
The following credit scoring factors may provide additional insight about the negative impact on your credit scores:
There are other related factors as well that also likely are impacting your scores, probably relating to the delinquent status of certain debts. All of these are going to be far more serious impacts than the penalty for too many inquiries.