Knowing what an Inquiry is and how it impacts your credit rating can help you keep your good credit and get a better score.  Understanding your credit and how it works before you go shopping may give you more financial options.

Whenever you authorize someone to check your credit as part of a loan or account application, it results in an Inquiry on your credit report.  These Inquiries are figured into the “New Credit” part of your score which accounts for 10% of the total.  Many factors determine the exact amount each Inquiry takes from your score, but typically, a single Inquiry can count from 1 to 12 points against it.  And they stay on the report for TWO years.

RATE SHOPPING
The FICO scoring system allows for rate shopping when you are applying for mortgages or auto loans.  All of the credit pulls or checks for real estate or automobiles that are done within a TWO WEEK period will only count as ONE against your score.  This is only for real estate and autos, NOT credit cards or other loan applications.

This is because most lenders send your application to several different funding sources to see which one gives an approval and what the best terms available are.  So even though they will all show up on your credit report, they will all be treated as one single Inquiry reflected against your score.

NOTE: Some of the newer FICO scoring models allow for all mortgage and auto Inquiries within a 45 day period to only count as one against your score. 

WHAT TO DO
Limit the number of credit applications you sign for.  If you are doing real estate or automobile shopping, keep it all within a 14 day period to insure minimal impact on your credit rating. 

You can indicate in writing that you are authorizing the lender to apply for credit on your behalf from this date to that date.  If they keep shopping the loan around after that, and you are hit with credit Inquiries on your reports, you have a better chance of getting them corrected with the proof that you only authorized applications for so many days.

You can get a Credit Check-Up from us that includes more information with strategies to get a better credit score.