In the following article I will explain how credit report inquiries can sometimes lower your credit score, even if only slightly. Depending on the type of inquiry, your score can lower 0 – 10 points -even more with multiple inquiries. While this should not be a major credit worry, it is helpful information to keep in mind.
What is a credit inquiry?
As the name suggests, a credit inquiry is the nomenclature used when anyone pulls your credit report for review. There are two main types of inquiries: inquiries that are only seen by you, and inquiries that are seen by everyone who reviews your credit report. Only the latter affects your credit score.
While multiple inquiries make a bigger impact on your credit score, multiple inquiries of the same type (auto, mortgage, credit card, etc.) within the same 2-week period are usually only counted as one inquiry. The credit bureaus started doing this after customers started to complain that their scores were dropping 20 – 30 points in one weekend of car shopping (often when you are seeking financing for a new car, dealerships will make 20+ inquiries).
This brings forth an important tip: when you are seeking credit (filling out credit card applications, for example), do it in “bursts”. If you are going to apply for 5 credit cards, minimize the credit score impact by doing it all on the same day and then waiting a couple of months (if you have no success the first time) to do it again. Multiple credit inquiries indicates to credit bureaus that you are desperately in need of credit because you cannot honor your current obligations. This is why they lower your score.
Types of inquiries that do not affect your score
- Pulling your own credit report is not seen by anyone but you.
- Inquiries for pre-approval offers such as those “You’ve been pre-approved!” letters you get in the mail.
- SOME credit inquiries made by debt collectors.
Types of inquiries that do affect your score
- Inquiries made by creditors when you apply for credit.
- Inquiries made by cell phone companies when you apply for a cellphone.
- Car dealerships inquiries.
- Other misc. credit applications (such as a home loan).
We did not list every type of inquiry that can affect your credit score. Hopefully this gives you a slightly better idea as to how credit inquiries can affect your score.
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Car dealership inquires will not affect your credit score if made within a 45 days period. All car loan inquires within a 45 days period are treated as one inquiry
I do not believe what you are saying is true. The bureaus did change the rules about inquiries, but they need to be within a 14-day period to only count as one. They also need to be the same type of inquiry (auto loan, credit card card, mortgage, etc.). Do you have any resources you could point me too.
Craig Watts, spokesman for the Fair Isaac Corp., which created the FICO credit score system more than 25 years ago.
Here is the exact quote from an interview
“In general, if you’re shopping for a home or auto loan and contact several different lenders to compare rates, it won’t hurt your credit score. That’s because the FICO computing system was changed a few years ago to protect consumers from being penalized for seeking multiple, competitive interest rates on home or auto loans. If you have several inquiries from car loan or mortgage companies in a 45-day period, they’re lumped together as a single inquiry, Watts said.”
Send me your email to info@carloan.vg and i will send you the whole interview
i am sorry Ryan my email is info @ carloan dot vg
You are right. They changed the rules again. MyFICO.com says:
What to know about “rate shopping.”
Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you’re only looking for one loan. To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for auto or mortgage inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.
I wonder if the other bureaus adopted this model. Most notably, Equifax’s Beacon Score since on the West Coast, most lenders and dealers use Equifax.
Ryan
Thank you for your help!