Know How Your Credit Scores Respond to Various Credit Inquiries

One of the most commonly asked questions is, what is the relationship between inquiries and credit scores? Not many people are aware that inquiries do not make a heavy impact on credit scores. For an inquiry to make an impact it has to be a hard inquiry and there have to be many inquiries.

Types of inquiries

There are two types of inquiries – hard inquiry and soft inquiry. A soft inquiry is that which occurs when you review your credit report. It has no effect on your score. However, a hard inquiry occurs when lenders and prospective pull your credit report. They must have your written permission to do so. These credit inquiries that occur because you initiated them cause damage to your score.

Old inquiries are not considered

Only new inquiries initiated in the past one year are considered at the time of calculating your credit score. But they remain in the report for 24 months.

Rate Shopping

When you are shopping for mortgage and loan, you can be assured that a special logic is used to calculate the score. It is done with a view to accommodate both the shopper and the lender. The FICO model gives a buffer time when the consumer is rate shopping so as to prevent inquiry duplication.

Therefore, inquiries related to student loans, mortgage and auto loans that have been initiated in the past one month are ignored. It only takes into account those inquiries that are older than one month but have occurred in the past 12 months.

Therefore, credit experts recommend that you should not fill too many applications for credit and when you are shopping for loans, you must complete them in the given grace period so as to prevent a separate inquiry from appearing.