Does Online Gambling Affect Your Credit Rating
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It can be helpful to think of your credit scores as a pie that represents your financial well-being.
Your pie is divided into slices, each of which represents a different factor that goes into your credit scores. One large slice is your open credit card utilization rate, another is your percentage of on-time payments, another is the length of your credit history and yet another is the number of derogatory marks on your credit reports.
And then there’s a tiny slice that represents your hard credit inquiries. Every time you apply for more credit, you take a small bite out of this slice. But what exactly is a hard inquiry, how does it differ from a soft inquiry and how much of an effect does it really have on your credit?
Let’s start with the basics.
What is a hard inquiry?
Hard inquiries (also known as “hard pulls” or “hard credit checks”) generally occur when a financial institution, such as a lender or credit card issuer, checks your credit when making a lending decision. They commonly take place when you apply for a mortgage, loan or credit card, and you typically have to authorize them.
A hard inquiry could lower your scores by a few points, or it may have a negligible effect on your scores. In most cases, a single hard inquiry is unlikely to play a huge role in whether you’re approved for a new card or loan. And the damage to your credit scores usually decreases or disappears even before the inquiry drops off your credit reports for good (hard credit checks generally stay on your credit reports for about two years).
That doesn’t sound so bad, but you may want to think twice before applying for a handful of credit cards at the same time — or even within the span of a few months. Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider you a higher-risk customer, as it suggests you may be short on cash or getting ready to rack up a lot of debt. So consider spreading out your credit card applications.
How many hard inquiries is too many?
The effect of a hard inquiry on your credit scores ultimately depends on your overall credit health. In general, adding one or two hard inquiries to your credit reports could lower your scores by a few points, but it’s unlikely to have a significant impact.
Having a lot of hard inquiries within a short time frame though will likely have a greater impact on your scores. This is because lenders — and in effect, credit-scoring models — look at multiple credit applications in a short amount of time as a sign of risk. Though there can be exceptions when you’re shopping for specific types of loans, like car loans, student loans or mortgages.
Learn more about minimizing the effect of hard inquiries below.
What is a soft inquiry?
Soft inquiries (also known as “soft pulls” or “soft credit checks”) typically occur when a person or company checks your credit as part of a background check. This may occur, for example, when a credit card issuer checks your credit without your permission to see if you qualify for certain credit card offers. Your employer might also run a soft inquiry before hiring you.
Unlike hard inquiries, soft inquiries won’t affect your credit scores. (They may or may not be recorded in your credit reports, depending on the credit bureau.) Since soft inquiries aren’t connected to a specific application for new credit, they’re only visible to you when you view your credit reports.
Will checking my own credit scores result in a hard inquiry?
No. This is reported as a soft credit check, so it won’t lower your scores. You can check your VantageScore 3.0 credit scores from two major credit bureaus, Equifax and TransUnion, for free at Credit Karma as often as you like without affecting your credit scores.
Examples of hard and soft credit inquiries
The difference between a hard and soft inquiry generally boils down to whether you gave the lender permission to check your credit. If you did, it may be reported as a hard inquiry. If you didn’t, it should be reported as a soft inquiry.
Let’s look at some examples of when a hard inquiry or a soft inquiry might be placed on your credit reports. Note: The following lists are not exhaustive and should be treated as a general guide.
Common hard inquiries
- Mortgage applications
- Auto loan applications
- Credit card applications
- Student loan applications
- Personal loan applications
- Apartment rental applications
Common soft inquiries
- Checking your credit score on Credit Karma
- “Prequalified” credit card offers
- “Prequalified” insurance quotes
- Employment verification (i.e., background check)
Keep in mind, there are other types of credit checks that could show up as either a hard or soft inquiry. For example, utility, cable, internet and cellphone providers will often check your credit.
If you’re unsure how a particular inquiry will be classified, ask the company, credit card issuer or financial institution involved to distinguish whether it’s a hard or soft credit inquiry.
How to dispute hard credit inquiries
We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau, or CFPB, for further assistance.
This could be a sign of identity theft according to Experian, one of the three major credit bureaus. At the very least, you’ll want to look into it and understand what’s going on.
Keep in mind, you can only dispute hard inquiries that occur without your permission. If you’ve authorized a hard inquiry, it generally takes two years to fall off your credit reports.
How to minimize the effect of hard credit inquiries
When you’re buying a home or car, don’t let a fear of racking up multiple hard inquiries stop you from shopping for the lowest interest rates.
FICO gives you a 30-day grace period before certain loan inquiries, like those for mortgage or auto, are reflected in your FICO® credit scores. And FICO may record multiple inquires for the same type of loans (again, like mortgage and auto) as a single inquiry as long as they’re made within a certain window. This window is typically about 14 days.
While some lenders can rely on scoring models that give you more time to shop without incurring an additional hard inquiry, you may want to stick to 14 days to do your comparison shopping, since you likely won’t know which scoring model a lender relies on to generate your score.
Next steps
Your credit scores play a big role in your financial well-being. Before applying for credit, take time to build your credit scores. With stronger credit, you may improve your chances of being approved for the financial products you want at the best possible terms and rates.
Avoid applying for multiple credit cards within a short amount of time. While one hard inquiry may knock a few points off your scores, multiple inquiries in a short amount of time may cause more damage — unless you’re rate-shopping for a home or car, in which case you’ll likely have a grace period to shop around.
To help you keep track of hard inquiries that may influence your credit scores, check your credit reports from Equifax and TransUnion at Credit Karma.
Does Online Gambling Affect Your Credit Rating Chart
Related Articles
Q: What does your credit score and online compulsive gambling have in common?
A: Both are largely dependent on your ability to borrow money.
Can you gamble away your credit score?
You betcha. Even if you have the financial means to fund your online gambling habit, more times than not, you are using some sort of electronic funding option that is credit score dependent, such as a bank’s credit card. But the long term consequences of a poor credit score are staggering, even if you are not addicted to online gambling. More here on how online gambling can affect your credit rating. And a section for questions about credit and online gambling at the end.
Gambling away your credit score
Like it or not, an individual’s credit score is not an indicator of wealth or financial security, it only indicates whether or not you are good at borrowing money, and paying it back. But the lingering effects of bad credit may last longer and affect more life changing decisions than a compulsive gambling addiction. So who is at risk of ruining credit? And what can you do about online gambling problems? We explore here.
What is credit rating?
Simply put, not paying your credit cards bills on time will drastically lessen your credit score. And once your credit score is damaged, the fix is not simple. The most obvious effect of bad credit is the lost ability to qualify for any type of major purchase, or additional credit including an automobile, rental apartment or a home. Another effect often overlooked, about half of employers are pulling credit information to consider individuals for employment. This includes employer’s in the private sector, public sector and even military. The most shocking part of this scenario, is this is happening to individuals in their 20’s, or even younger.
How gambling affects your credit score
Often compulsive gamblers can open numerous credit card accounts. This action in and of itself will lower your overall credit score. Then, you can get into the cycle of using one credit card to pay off the debts of other credit cards. Generally, each subsequent credit card balance transfer is tied to a higher interest rate, increasing financial burden.
And what’s more is that compulsive gamblers commonly lie, cheat or steal to continue fueling their gambling addiction and feeding the credit cycle. This cycle is not easily broken, and often times ends up in bankruptcy. Additionally, there is typically a lag between the time problem gamblers begin an actual financial meltdown, and the time when credit score actually takes a hit. This lag gives gamblers the opportunity to continue borrowing money and get even deeper in debt.
High risk online gamblers
Why do gamblers gamble? Either for recreation and entertainment, or to avoid and cope with the emotional or psychological stresses of life. But who is particularly at risk of ruining a good credit score?
1. Young online gamblers – Unfortunately, younger gamblers (those ranging from 18 years of age to 25 years of age) almost exclusively use credit cards to fund their online gambling expenditures. Seemingly harmless at first, the act of funding your gambling habits using a credit card can lead to devastating results.
2. Compulsive/Problem gamblers – The danger of credit card funding of gambling is most frightening for those who are either at risk problem gamblers or who exhibit symptoms of compulsive gambling. “Compulsive gambling”, or “pathological gambling”, as psychiatrists label the behavior, is defined as an inability to stop gambling. When you combine an inability to control ones actions, with the immediate access to thousands of dollars, the results are often disastrous.
How to stop online gambling
The best thing for gamblers who are driving down the road of bad credit from a gambling addiction, is to seek help. However, due to the nature of addictive disorders, it may take many years for a gam0lber to realize they have a problem and even longer for individuals to take the proactive steps to take control of their problem. In fact, the point of realization normally occurs when a compulsive gambler can neither fund their gambling nor make payments on the debts owed. But help is out there. Cognitive behavioral therapies can help gamblers manage compulsive thinking in combination with lifestyle changes and support groups. You can also block online gambling sites to self monitor your use. Or you can seek professional help with a counselor who specializes in treatment compulsive gambling.
Does Online Gambling Affect Your Credit Rating Scores
Online gambling and credit questions
Do you have questions about your credit while gambling online? Please ask here. We try to answer all legitimate questions with a personal and prompt response.