Credit inquiries count for about 10 percent of a person’s credit score, and they are also a factor we consider when assigning you a credit card score. The more inquiries you have into your report, the lower your credit score, especially if they occur within a short period of time.
Generally speaking, inquiries take about five points off a person’s credit score, though a person with a short credit history and a ton of inquiries will see his or her score drop more than five points. A person with a long and strong credit history might only see a one- or two-point drop.
This blog focuses on the misconceptions surrounding credit inquiries.
Misconception #1 About Credit Inquiries: If I pull my own credit report, my credit score will suffer.
There are two types of credit inquiries: hard and soft. Hard inquiries are those made into your credit report by a creditor with the purpose of determining whether to extend a loan or line of credit to you. Soft inquiries are those made by lenders or non-lenders for reasons that are not credit-related. For instance, you might pull your own credit report because you know that the best credit monitoring tool is to pull your own report regularly.
Credit-scoring bureaus know that people need to monitor their own credit scores, and they consider this responsible behavior. Therefore, you will never be docked points for pulling your own credit report.
Misconception #2 About Credit Inquiries: No one other than a potential creditor would look into my credit report.
Landlords, potential employers, and insurance companies might pull your credit report because they figure that if you are irresponsible in one area of your life, you might be irresponsible in other areas. In fact, insurance companies say there is a correlation between a person’s credit score and his or her likelihood of getting into a car accident!
A recent study also showed that about 60 percent of employers pull a potential employee’s credit score at least some of the time.
And although your history with rent payments is not part of your credit score, landlords want to know if you have problems paying your bills on time.
That said, these credit inquiries are all considered “soft” and will not hurt your score.
Misconception #3 About Credit Inquiries: Rate shopping for a mortgage or car loan will hurt my credit score.
Certain kinds of credit inquiries—those that commonly require rate-shopping—are treated a little differently than those that do not involve rate-shopping (e.g., credit cards). If you apply for a bunch of new credit cards, you can bet that your score will drop due the multiple inquiries into your credit score.
However, the scoring systems know that responsible borrowers shop for the best rates when trying to secure a mortgage, auto loan, or student loan. As such, the FICO score actually ignores any inquiries made in the 30 days prior to the loan application. Any inquiries made before this 30-day window are grouped with others within 14 or 45 days of one another (depending on which version of FICO the lender is using) to count as just one inquiry.
Knowing how to build credit, as well as all of the misconceptions about credit scoring and credit inquiries, is an important part of a good credit score. Learn more about the credit scoring systems by taking our quiz, “What Is My Credit Card Score?”, and attending the “Credit Advantage” teleseminar.
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A “credit card score” is a letter grade that reflects whether your credit card habits are helping you build credit or causing you to have bad credit: An “A” credit card score is excellent; an “F” indicates that you likely have bad credit. The lower your credit card score, the more likely you have bad credit and need to make immediate changes to your credit card behavior.
Tessa – it all depends on the employer. In the next interview, make sure you bring up everything they are going to see so they won’t get surprised.
What I would like to know is when an employer pulls your credit possible for a job and you get no feedback, but upon crecking my credit I saw they pull my file. How do I find out what I need to improve on to get them to hire me. I didnt get nothing no letter, no email, no phone call nothing.