Accounting for 10% of your overall FICO score, Inquiries are a subject of much debate.
Let’s go back to basics about Inquiries.
An inquiry is a record of any company viewing your credit report for the purpose of reviewing your credit history. The Fair Credit Reporting Act (FCRA) allows any organization to view your credit file as long as they have a permissible purpose.
Permissible purpose is defined by the FCRA as;
• Ordered by a court or a federal grand jury subpoena.
• Instructed by the consumer in writing.
• For the extension of credit as a result of an application.
• For employment purposes.
• For the underwriting of insurance.
• To review a consumer’s account.
• To determine eligibility for a professional license.
• In connection with child support.
Not all Inquiries are created equal.
There are two different types of inquiries; hard inquiries and soft inquiries.
Hard inquiries occur when someone checks your credit report for the purpose of extending credit.
Common hard inquiries are credit checks from:
• auto lenders
• mortgage lenders
• credit card companies
• cell phone companies
• utility companies
• collection agencies
Soft inquiries, also known as “Account Review Inquiries”, occur when:
• You check your own credit report
• An employer checks your credit
• A lender checks to see if you qualify for a pre-approved offer
• A current creditor reviews your report
Soft inquiries do not impact your credit score, in fact, they only appear on your consumer credit report. This means a lender checking your credit will not see any soft inquiries.
Hard inquiries account for 10% of your overall FICO score and remain on your credit report for 2 years from the date they were initiated. But the only hard inquiries which impact your credit score are those ran within the last year.
Quick Tip: To get the most positive impact from this category, try not to have more than 1 inquiry every 6 months.
Finally, we saved the best for last.
Inquiries ran within a one-week time frame within the same industry are grouped together and only count against your FICO score as one inquiry.
So if you went car shopping and your auto dealer sent your credit application to 12 different lenders who each ran your credit report; don’t worry, although all 12 inquiries will report on your credit history, they will only impact your credit score as a single inquiry.
You can learn more about credit inquiries on the following page.
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