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How Credit Report Inquiries Affect Your FICO Score

We all know that the best practice to taking out a loan is to compare multiple offers against each other, but will that many inquiries on your credit hurt your scores?
How Credit Report Inquiries Affect Your FICO Score

This is a question we are often asked, “Will multiple credit report inquiries lower my FICO score?” The answer is maybe. They can have an effect on your scores if you have multiple hard inquiries, as opposed to soft inquiries.

Soft Inquiries
A soft inquiry is when your credit is not being reviewed by a lender. So, when you check your score for free annually, a credit card company who checks your report to offer you discounts and promotions, or a business with whom you have an open account with already is checking your credit history, these things will not count against you. You score will not be lowered due to these inquiries and if you believe they have had an effect on your credit, then you should call the reporting agency immediately.
Hard Inquiries
A hard inquiry is when a potential lender is pulling your credit report to see how worthy you are of a new line of credit. These include, mortgage lenders, auto finance companies, or any other companies in which you have requested financing. Each inquiry will be treated as a single inquiry and each could shave a couple points off your FICO scores. The opposite is true if you apply for multiple quotes from one lending type, such as multiple auto lenders or multiple mortgage companies. For example, if you are shopping for a car and you apply at 10 different banks, credit unions, and dealerships all within a 45 day period, they will only count as one single inquiry instead of 10 different ones.

How Your FICO Score is Determined

Inquiries play a small part when it comes to determining your scores. The following is a list of factors that are taken into account:

  • Number of recently opened accounts
  • How long you’ve had your accounts open
  • Time since credit inquiries were filed
  • Number of recent inquiries

Remember, your FICO score does not include any involuntary inquiries made by businesses in which you did not apply for credit. Also if your employer pulls your credit report, if you pull your own credit report, or if an auto insurance company pulls your report then your FICO score should not be effected.

How Much Could My FICO Score Change?

Generally, credit inquiries have a small impact on your FICO scores because they have bigger fish to fry in terms of your credit worthiness, such as timely payments and collection accounts. The exact impact that any inquiry has on your scores will vary between individuals and really is based on how your credit report reads. The better your credit score is the less effect multiple inquiries will have on you, and vice versa.

There are five data categories that make up your FICO score, and inquiries fall into the “search for new credit” category, which currently is only accounting for 10% of your score. This means that when it comes down to it, inquiries are the smallest piece to the FICO puzzle. Recently, data was released stating the true impact an inquiry has on your score and it showed that 57% of people’s scores are not affected at all. In fact, only 4% of consumers lose more than 20 points in their FICO scores because of a creditor pulling their reports, according to Frederic Huynh, one the scientists at FICO.

Shop for Financing the Smart Way

If you’ve got bad credit and you’ve been putting off applying for car credit because you’re afraid that the inquiries are going to lower your score even farther, throw those fears out the window. Your score will not be affected as much as you may have thought. In fact, if you apply for an auto loan today you could be driving home in a new car, truck, or SUV tomorrow.

At Auto Credit Express we have been helping bad credit consumers find a dealership that will work with them to get them approved for a loan and back on the road in the matter of a few days. Whether your FICO scores are at the top of the leaderboard or in last place, we can help you. When you work with us you don’t have to worry about those pesky inquiries, and what they may do to your credit scores because we are a one stop shop. You only need to fill out one application and we will match them with a dealership in your area that will be able to offer you affordable interest rates and favorable loan terms, which will help you to rebuild your credit back to a good standing.

Get started today by filling out our online car loan application.

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