Wanda Wilkinson

A credit inquiry reflects on a credit report to show that a business has previously requested a copy of the report.  When you check your credit report, you may notice that a number of credit inquiries have been made, sometimes from a business that you don’t recognize.  Not all inquiries affect your FICO score… 

Credit inquiries that do NOT affect your FICO score include:

1.      Personal inquiries.  (when you check your own credit on-line)

2.      Credit checks made by creditors to offer you goods or services.  (Pre-approved credit cards)

3.      Inquiries made by creditors with whom you already have a credit account.  (They do this to see if you are eligible for a credit limit increase or interest rate reduction)

4.      Inquiries made by prospective employers.

5.      Inquiries made by landlords.

These are all referred to as “Soft Inquiries”.
 

Only the inquiries that result from an application for new credit MAY affect your credit scores.  These are referred to as “Hard Inquiries”.  When you apply for a mortgage, auto loan, credit card, or any other type of credit, you authorize the lender to request a copy of your credit report.  This tells every other creditor who views your credit that you may be taking on more debt--therefore, would consider you a higher risk.
 

Scores will be impacted differently by the type of creditor that views your credit.  Mortgage and auto loan inquiries have less of a chance of negatively affecting your credit than a credit card inquiry.  FICO is also able to distinguish if a consumer is “rate shopping”.  If you have several mortgage inquires or several auto loan inquires, FICO is able to determine that a consumer is simply shopping for the best interest rate.  These inquiries must be done within a 45 day period of one another and will only count as one inquiry.  Credit card applications on the other hand count every inquiry.  Be careful, because credit card inquiries have the highest probability of lowering your score.
 

To put inquiries into perspective:  There are 5 parts to the FICO scoring model.  Inquiries fall under “New Credit” which only accounts for 10% when calculating your FICO score.  Even though inquiries count for such a small part of your score, every little bit helps and you should try not to go overboard.  Especially for those who fall short in the 4 other areas that determine scores.
 

Knowing that checking your personal credit reports does not have an effect on your credit scores, it is a good idea to check them regularly.  You can do this at www.annualcreditreport.com.  Maintaining accurate credit reports is good credit management and will help to improve credit scores over time.