Your Credit Score

Inquiries on your credit are one of the most misunderstood factors of the credit scoring. An inquiry on your score count for 10% of your overall score. An inquiry is a check on your credit. There are two types of inquiries, soft and hard.

A soft inquiry is one that does not hurt your score. Such examples are job credit checks, insurance checks, or credit card “pre-approved” offers.
A hard inquiry is a credit check that does put a ding on your score. Such an example would be a credit check by a mortgage lender, an auto dealer, or a credit card company in certain situations.

You have 45 days to have a mortgage lender (or auto lender) check your credit and have it only count as one inquiry. This is completely opposite to what many loan officers will tell you. First, many loan officers don’t educate themselves, and they don’t want you shopping them. So they put fear in your mind that if you check with other lenders and have them run your credit, that “you may not qualify anymore”.

Now it is true that multiple credit checks will bring your score down. But that scenario would be when you are doing things like shopping for a car, and opening credit cards, and other credit checks at the same time. The 45-day window is understood in the credit scoring model since it “allows you” to shop for better terms without killing your credit score.

A credit inquiry on average hits your credit score for 5 points, however it can hit it for anywhere from 2 points to 50 points. You heard me right. Why is this? The credit scoring model has 1,000’s of profiles that it uses to judge and create a credit score from. Based off of statistics, people who are getting their credit checked very often, are those in financial trouble. Hence having credit checks often can bring your score down as you are viewed as high risk.