How Do Credit Inquiries Impact Credit Scores?

If you apply for credit from a bank or company that offers credit, an inquiry will be reported on your report. This is referred to as a strong credit drawdown. The soft query is whether your report has been withdrawn by an institution that does not offer credit. Organizations that might pull a simple inquiry include: employers, non-lenders, government agencies, or yourself. Each time your credit report is pulled by the lending institution, it may have a negative impact on your score(s) by as much as 3 to 5 points. Inquiries from lending institutions are listed on the two-year credit report.

If you apply for a mortgage, student insurance, or car insurance, the inquiry should not affect your credit score for 30 days. In addition, inquiries about mortgages, student insurances, or auto insurances within 45 days are meant to count as a single inquiry only. These exclusions allow individuals to shop for the best credit rates and terms without incurring a penalty. Inquiries about all other types of credit such as: department store cards, bank credit cards, gas cards and inquiries about personal insurances are counted from your score instantly.

You are entitled to a free credit report annually from all three major credit agencies (TransUnion, Equifax and Experian). You can order the free report online at Annualcreditreport.com. According to government guidelines, each person is entitled to one free credit report per year from each of the major credit reporting agencies. After you get your free copy of your report, review it thoroughly for errors, inaccuracies, unauthorized inquiries, or any debt listed that you did not apply for. Also check if there are any authorized user accounts that you no longer want to be associated with, perhaps from an ex-spouse or parent.

Below are the basic account details to determine the credit score. Ten percent of the credit score is determined by the amount of credit inquiries an individual has submitted for the past twelve months. A teen’s fifth credit score percentage is determined by the length of time or the number of payments in your credit history. Because of this factor, it is usually beneficial to keep accounts that have been paid as agreed open. If you close an account, a good payment history will not count toward the credit score. Ten percent of the credit score is determined by the credit mix that is opened. A consumer’s ability to pay off a variety of revolving insurances and installments is a better risk than a less experienced consumer. Thirty-five percent of the score is determined by the payment date. Late payments have a greater detrimental effect than late payments. The remaining 30% of the score calculation is determined by the percentage of credit used by the consumer. It is beneficial to keep balances in revolving accounts that are less than 50 or even 30% of the available balances.