How Much Do Credit Inquiries Impact my Credit Scores?

Credit inquiries occur when a company pulls your credit report, which is usually the result of you seeking credit. The company name, their industry (i.s. auto, mortgage) and the date they reviewed your credit report are listed on your credit report.  The companies that can review your report are limited based upon a valid business need such as lending, employment, tenant screening, insurance underwriting, and others. This is specified by the Fair Credit Reporting Act (FCRA). Most inquiries remain on your credit report for 24 months. 

Hard Inquiries

Hard inquiries are inquiries that you initiate when you apply for credit (most of the time).  This results from applying for a credit card, auto loan, mortgage, student loan, or checking account. One exception is collection agency inquiries, which are sometimes classified as hard inquiries.  Hard inquiries can be included in credit scores.  Inquiries don’t have much of an impact on your score. In fact, most of them are ignored (read on).

If you are shopping for a vehicle, mortgage or a student loan, multiple inquiries for these industries are ignored during their first 30 days on file. Then, after 30 days has passed all auto, mortgage and student loan inquiries that occur within a 45 day period are counted as one search for credit. Essentially, you are not penalized for shopping within the first 30-day time frame when shopping for these loans. Please note that the inquiry information is still on the credit report, the logic above is simply how the scoring model considers the information.

Soft inquiries

Soft inquiries are usually not initiated by the consumer and normally occur when a credit card issuer has pre-approved you for credit or are in the process of “account monitoring.”  Soft inquiries also occur when you get a copy of your own credit report. These soft inquiries have absolutely no impact on your scores because scoring systems don’t even see them.  Soft inquiries are not displayed on the credit reports lenders see.  They can only be viewed by you.

Even though hard inquiries remain on your credit report for 24 months, they are only considered in credit scores for their 12 months.  Hard inquiries might impact your score, but they’re not guaranteed to impact your score.  Frankly, I think it’s silly to worry about inquiries. They’re worth the least amount of “points” in your credit scores.  Focus of paying bills on time and keeping credit card debt to a minimum and you won’t have to worry about inquiries.

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  You can follow John on Twitter here.