- What is a credit inquiry?
- Not all inquiries count toward your FICO score.
- Your FICO score is not affected when you check your credit.
- How inquiries are factored into FICO scores.
- Inquiries may or may not affect your FICO score.
- What happens when you apply for credit.
- Will my FICO score drop if I apply for new credit?
- What to know about “rate shopping.”
- Improving your FICO score.
What is a credit inquiry?
A credit inquiry is an item on a credit report that shows a business with a “permissible purpose” (as defined under the federal Fair Credit Reporting Act) has previously requested a copy of the report.
Not all inquiries count toward your FICO score.
- When you check your credit report, you may notice that a number of credit inquiries have been made, sometimes from businesses that you don’t know. But the only inquiries that count toward your FICO score are the ones that result from your applications for new credit.
- Inquiries that count toward your FICO score.There is only one type of credit inquiry that counts toward your FICO score. When you apply for a mortgage, auto loan or other credit, you authorize the lender to request a copy of your credit report. These types of inquiries, prompted by your own actions, appear on your credit report and are included in your FICO score.
- Inquiries that don’t count toward your FICO score.Your own credit report requests, credit checks made by businesses to offer you goods or services, or inquiries made by businesses with whom you already have a credit account do not count toward your FICO score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your FICO score.
Your FICO score is not affected when you check your credit.
- Checking your credit reports regularly to be sure they are accurate and error-free is a good idea. In fact, maintaining accurate credit reports is a part of good credit management, which can help to improve your FICO scores over time. You can order all three of your credit reports with FICO scores at www.myFICO.com. You can also order your credit reports from the credit bureaus. Either way, your FICO score is not affected by your own credit report checks which are voluntary.
How inquiries are factored into FICO scores.
- There are five types of information used to calculate a FICO score at any given point in time. Each type of information counts as a percentage of a total FICO score:
Payment history = 35% Amounts owed = 30% Length of
= 15% New credit = 10% Types of
credit in use
These percentages are based on the importance of the five categories for the general population.
- For particular groups, such as people with relatively short credit histories, the importance of the categories may differ. Inquiries are a subset of the “new credit” category shown above, which accounts for
10% of the total FICO score. Their importance depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history.
- In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. What’s important is the mix of information, which varies from person to person, and for any one person over time.
Inquiries may or may not affect your FICO score.
- A FICO score takes
into account only voluntary inquiries that result from your application
for credit. The information about inquiries that can be factored into
your FICO score includes:
- Number of recently
opened accounts, and proportion of accounts that are recently opened,
by type of account.
- Number of recent
- Time since
recent account opening(s), by type of account.
- Time since
- Number of recently
- A FICO score does not take into account any involuntary inquiries made
by businesses with whom you did not apply for credit, inquiries from
employers, or your own requests to see your credit report.
- For many people, one additional credit inquiry (voluntary and initiated
by an application for credit) may not affect their FICO score at all.
For others, one additional inquiry would take less than 5 points off
their FICO score.
- Inquiries can have a greater impact, however, if you have few accounts
or a short credit history. Large numbers of inquiries also mean greater
risk: People with six inquiries or more on their credit reports are
eight times more likely to declare bankruptcy than people with no inquiries
on their reports.
What happens when you apply for credit.
- When you apply
for credit, you authorize the lender to ask for a copy of your credit
report. This is how voluntary inquiries appear on your credit report.
- The inquiries section
of your credit report contains a list of everyone who accessed your
credit report within the last two years. The report you see lists both
voluntary inquiries, spurred by your own requests for credit, and involuntary
inquiries, such as when lenders order your credit report to offer you
a pre-approved credit card.
Will my FICO score drop if I apply for new credit?
- If it does, it
probably won’t drop much. If you apply for several credit cards within
a short period of time, multiple inquiries will appear on your report.
Looking for new credit can equate with higher risk, but most credit
scores are not affected by multiple inquiries from auto or mortgage
lenders within a short period of time. Typically, these are treated
as a single inquiry and will have little impact on the credit score.
What to know about “rate shopping.”
- Looking for a mortgage
or an auto loan may cause multiple lenders to request your credit report,
even though you’re only looking for one loan. To compensate for this,
the score counts multiple auto or mortgage inquiries in any 14-day period
as just one inquiry. In addition, the score ignores all mortgage and
auto inquiries made in the 30 days prior to scoring. So if you find
a loan within 30 days, the inquiries won’t affect your score while you’re
Improving your FICO score.
- If you need a loan,
do your rate shopping within a focused period of time, such as 30 days.
FICO scores distinguish between a search for a single loan and a search
for many new credit lines, in part by the length of time over which
- Generally, people with high FICO scores consistently:
- Pay bills on
- Keep balances
low on credit cards and other revolving credit products.
- Apply for and
open new credit accounts only as needed.
- Pay bills on
- Also, here are some good credit management practices that can help to
raise your FICO score over time.
your credit history if you have had problems. Opening new accounts
responsibly and paying them on time will raise your FICO score over
the long term.
- Check your
own credit reports regularly, and before applying for new credit,
to be sure they are accurate and up-to-date. As long as you order
your credit reports directly from the credit bureaus, or through
an organization authorized to provide credit reports to consumers,
such as myFICO®, your own inquiries will not affect your FICO score.