Consumer Law

Inquiries their Effect on Your Credit Score

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

When a consumer seeks credit, the lender will report an inquiry on the consumer's credit reports. When a bank sends out a pre-approved loan application or makes an account review, the bank reports that event as an inquiry. The former inquiries are known as hard inquiries and the latter as soft inquiries.

Consumers reading their reports worry the inquiries are reducing their credit scores. However, the soft inquiries do not affect credit scores at all and the hard inquiries lower credit scores but not very much.

For most people, one additional hard inquiry will takes less than five points off the FICO score. Inquiries can have a greater impact if bunched together. A large number of inquiries might mean someone is in trouble financially. However, Fair Isaac, the company that created FICO scoring, now counts multiple auto or mortgage inquiries in any 45-day period as just one inquiry. In addition, the score ignores all inquiries made in the 30 days prior to the scoring according to Evan Hendricks, author of the book, Credit Scores & Credit Reports. Hard inquiries more than 6 months old are not counted at all.

Full post as published by California Credit Law Blog on December 18, 2008 (boomark / email).