How Inquiries Affect Your Credit Score

Many people wonder how inquiries affect their credit score?  Does it hurt your credit score to check your credit, or if a potential employer checks your credit?  Here’s the scoop on how inquiries affect your credit score…

Ten percent of your credit score comes from applications made to your credit report.  Each time a creditor or a lender takes a look at your credit report to determine whether or not to extend you credit an additional inquiry is placed on your credit report.

If you’ve checked your credit report lately, you may have noticed inquiries from businesses you might not have heard of.  Not all of these inquiries have an effect on your credit score, so don’t panic!

The inquiries that DO affect your credit score are those from your own credit applications.  When you apply for a credit card, auto loan, or mortgage, you give the lender permission to look at your credit report.  This places a voluntary inquiry on your credit report and these are the inquiries that do have an effect on your credit score.

Other inquiries that might appear on your credit report do not count
towards your credit score.  These inquiries include those made by
prospective employers, businesses that you already have credit with,
businesses seeking to offer goods or services to you, and your own
requests for credit reports.  While these inquiries do appear on your
version of the credit report they aren’t included in the calculation of
your credit score.  If you didn’t apply for credit for an inquiry that
appears on your credit report, then it’s very likely that the inquiry
isn’t included in your credit score.

Shopping around for the best rates on mortgage or auto loans does
not hurt your credit score, if the shopping is done within 45 days.
All mortgage and auto loans made within a certain span of time are
treated as a single entry by the credit score calculation.  Note that
some lenders might choose to use an older version of the credit score
calculation that reduces the shopping span to 14 days.

Depending on the information already in your credit report, your
credit score might not decrease at all when you make an application for
new credit.  If you have a longer credit history and more accounts,
your credit score usually won’t decrease from a new application.  If it
does decrease, it won’t be by more than a few points.  Credit inquiries
have the greatest effect on people who have short credit histories and
only a few accounts.

Although credit inquiries remain on your credit report for two
years, those made within the past six months have the greatest impact
on your credit score.  Even so, inquiries only count for ten percent of
your credit score, so your score won’t decrease by very much when you
make an additional inquiry.

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