Do Credit Inquiries Hurt Your Credit Score?
September 18, 2000, Revised January 29, 2004, Revised November 18, 2004,
Revised November 16, 2006
Credit inquiries reduce credit scores because statistical studies show that multiple inquiries are associated with high risk of default. Distressed borrowers often contact many lenders hoping to find one who will approve them.
But multiple inquiries can also result from applicants shopping for the best deal, as indicated by the following letter.
"You keep preaching about the need to shop for the best deal, but I’m afraid that shopping will hurt my credit. I’m told that the more times lenders check on my credit, the worse my credit is going to be. Is that true?"
Credit inquiries will not significantly impact your credit rating if you do all your shopping in a short period. Since the market can change from day to day, this is the only effective way to shop anyway.
To avoid catching shoppers in their net, credit scorers ignore auto and mortgage inquiries that occur within 30 days of a score date. Suppose I shop a lender on May 30, for example, and the lender has my credit scored that day. Even if I had shopped 50 other lenders in May and they had all checked my credit, none of those inquiries would affect my credit score on May 30.
Inquiries from April and back 11 months would, however, be counted on May 30. To avoid biasing the credit score from earlier shopping episodes, the scorers treat all credit inquiries that occur within a 14-day period as a single inquiry. If you shopped 50 lenders during April 1-14, they would count as one inquiry. If you spread them over April 1-28, they would count as two inquiries. You will damage your credit only if you spread your shopping over many months, which makes little sense in any case.
[Recently, the 14-day rule was extended to 45 days in a new version of the FICO scoring system. However, lenders can choose whether they want to use the old version using 14 days, or the new version using 45 days. For a borrower, it is best to assume that the 14 day rule is operative.]
Circumstances can cause a consumer to shop, drop out of the market, and return later when conditions are more favorable. You minimize the adverse effect on your credit score by concentrating each shopping episode to 14 days or less.
Consumers should not be concerned about inquiries they make, such as ordering a credit report. Self inquiries don't affect the credit score. Neither do inquiries from your existing creditors, potential employers, or businesses considering whether or not to solicit you. The only inquiries that affect credit score are those by new credit grantors who you have explicitly authorized to check your credit.
Why Credit Inquiries Reduce Credit Scores
Credit inquiries reduce credit scores because statistical studies show that multiple inquiries are associated with high risk of default. Distressed borrowers often contact many lenders hoping to find one who will approve them.
But multiple inquiries can also result from applicants shopping for the best deal, as indicated by the following letter.
"You keep preaching about the need to shop for the best deal, but I’m afraid that shopping will hurt my credit. I’m told that the more times lenders check on my credit, the worse my credit is going to be. Is that true?"
How to Shop Without Reducing Your Credit Score
Credit inquiries will not significantly impact your credit rating if you do all your shopping in a short period. Since the market can change from day to day, this is the only effective way to shop anyway.
To avoid catching shoppers in their net, credit scorers ignore auto and mortgage inquiries that occur within 30 days of a score date. Suppose I shop a lender on May 30, for example, and the lender has my credit scored that day. Even if I had shopped 50 other lenders in May and they had all checked my credit, none of those inquiries would affect my credit score on May 30.
Inquiries from April and back 11 months would, however, be counted on May 30. To avoid biasing the credit score from earlier shopping episodes, the scorers treat all credit inquiries that occur within a 14-day period as a single inquiry. If you shopped 50 lenders during April 1-14, they would count as one inquiry. If you spread them over April 1-28, they would count as two inquiries. You will damage your credit only if you spread your shopping over many months, which makes little sense in any case.
[Recently, the 14-day rule was extended to 45 days in a new version of the FICO scoring system. However, lenders can choose whether they want to use the old version using 14 days, or the new version using 45 days. For a borrower, it is best to assume that the 14 day rule is operative.]
Circumstances can cause a consumer to shop, drop out of the market, and return later when conditions are more favorable. You minimize the adverse effect on your credit score by concentrating each shopping episode to 14 days or less.
Only Inquiries From Credit Grantors Count
Consumers should not be concerned about inquiries they make, such as ordering a credit report. Self inquiries don't affect the credit score. Neither do inquiries from your existing creditors, potential employers, or businesses considering whether or not to solicit you. The only inquiries that affect credit score are those by new credit grantors who you have explicitly authorized to check your credit.