As we all know one’s credit score is very important for much more than just getting a loan or opening a new credit card account. Consequently, everyone is very careful about maintaining their good credit so that they can apply for that desired loan or card. The common belief is that, the number of inquiries made to your credit history will have an impact on your score, so you hesitate to apply. But, what’s the good of having great credit if you can’t request a loan or new card? The truth is that not all inquiries will damage your standing, because there are different categories of queries. They are known as hard and soft inquiries.
Let’s start with the soft inquiry. This is when you request your own credit history (which you can do for free once a year) or when a company checks it before offering you a product or service. The credit bureaus see this as your using this information for personal reasons, and not as a desperate attempt to obtain additional credit.
Furthermore, a credit card company or other type of business might pull a report to verify your identity before sending you a credit invitation by mail. These are also considered soft inquiries, as they are the result of someone trying to garner your business. Chances are you are not even aware that this is happening, and it does not indicate that you’re requesting additional credit.
Hard inquiries, that is when you are applying for a loan or other credit, do have the power to affect your credit score. Most hard inquiries happen when you are seeking a new mortgage loan, auto loan or credit card. These companies pull your credit history to judge your worthiness for receiving the loan or credit. The ding comes because you are, in fact, showing a need for additional funds.
Fortunately, just one hard pull within a 6 month period, will not affect your score unduly. As a matter of fact depending on the type of loan, there might be some respite. For certain loans, it is definitely advisable to shop around. That’s just good business sense. Transactions such as auto, mortgage or student loans are definitely in this category. Originally, each application counted as one “pull” and was reflected as such in the credit score. After a large number of consumers complained about being penalized for being good shoppers, Fair Isaac (the people who bring you your FICO score) relented.
These are the exceptions for auto, mortgage and student loans:
- An inquiry buffer is in place and all AUTO, MORTGAGE, and STUDENT LOAN inquiries within 30 days from Scoring are IGNORED.
- AUTO, MORTGAGE, and STUDENT LOAN inquiries in any 14 day period count as one inquiry; this is called de-duplication in the industry.
The caveat is that you don’t know whether the above mentioned loans are categorized as such at the time of reporting, but you can always question it with the reporting agencies.
So how many inquiries are too many? It’s hard to tell, but the best bet is to keep them to a minimum. If you are still confused about your credit and your potential for a loan, call (888) 789-4365 to speak to our Underwriters.