Difference between inquiries that affect or not your credit score

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You probably know that when you apply for a loan or credit card, the potential creditor looks at or checks your credit report and Score. But you may not know that other situations could also affect your credit score, like when a prospective employer reviews your credit report. Here’s what you need to know about the difference between credit score-affecting and non-credit-affecting inquiries and the different types of impact they can have on your credit report.

What is a credit score inquiry?

A credit score inquiry is when a lender looks at your credit report because you applied for new credit, such as a credit card, car loan, home loan, or an increase in an existing line of credit. These types of inquiries can affect your credit score (the most common being the FICO® Score) as seeking new credit can make you seem like a risk to lenders, who may be concerned about your ability to repay the debt.

Inquiries that affect your credit score won’t affect you too much.

Good news: The damage from credit score inquiries is minimal for many people, typically taking less than five points off your credit score. One or two credit checks won’t significantly hurt your credit.

Don’t let fear of credit inquiries keep you from shopping around for the best deal on auto loans, student loans, or mortgages. Credit inquiries that affect your credit score are made for things like these and occur over a certain period (FICO calls them shopping periods). They are generally considered a single inquiry. Although each lender may use a different formula to calculate a purchase period, it is typically 14 to 45 days.

When to be careful

New lines of credit make up only 10 percent of your credit score, according to myFICO.com, but that doesn’t mean you should rack up inquiries that affect your Score without a second thought.

  • Although credit inquiries count toward your credit score for only 12 months, they remain on your credit report for two years.
  • Inquiries can significantly impact someone with a short credit history and just a few accounts, compared to someone with a long history and a wide variety of credit experience.
  • To a lender reviewing your credit report, many inquiries that affect your credit score in a short time can be an indication of increased credit risk because it can appear as if you are trying to get a lot of credit quickly. (The exception is if you shop around for a short-term auto, student, or home loan.)
  • Drops in your credit score can result in higher interest rates when you borrow, meaning you pay more over the life of the loan.

What is a non-credit score inquiry?

An inquiry that does not affect your credit score is when your credit report is checked without applying for credit. For example, insurance companies or prospective renters may review your credit report to assess risk, or future employers do background checks. Credit card companies may also check your credit to service and manage any current relationship with them. These inquiries do not affect your credit score or appear on your credit report.

Protect your credit

To maintain a healthy credit score, avoid inquiries that affect your Score when possible. Try to say no to those credit cards offered when you pay in stores if they don’t make sense in your financial picture as a whole. If you’re shopping around for a car, student loan, or home, it’s best to keep it within 14-45 days so that multiple inquiries register as one. Also, keep an eye on your credit report. If you see an investigation affecting your Score that you didn’t initiate, take steps to protect yourself from identity theft.

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