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Most people know that if you have to many credit inquires it can effect your credit score. But the rest of the story about credit inquires is not so clear. Here are some things to consider when having your credit run.
Not are credit inquires are created equal. What does not all credit inquires not being equal mean to you? When having your credit run take in to consideration who is running your credit and you will better understand how it is going to effect your credit. It is generally assumed that each time you have your credit run it drops your credit about 5 to 10 fico score points, it would be closer to 5 points. The fact is that when your have your credit run your score may drop 5 points depending on who runs it.
The exception to the rule of your credit dropping the supposed 5 points each time is when an auto dealer, auto lender, mortgage broker, or lender runs your credit. You might ask why would they get a pass on dropping your score and not everyone else? The answer to why dealers and mortgage companies get a pass is that they don't get a pass, they get a window of time. The credit bureaus know that when you go to have your credit run you are interested obtaining credit, so when you go to apply for a car loan the credit bureaus understand that you may be doing some shopping. The same standard for mortgage loans applys to credit inquires and the effect on your score because in most cases you are going to do a bit of shopping to find the right loan for your home. The window of time that you get when having the your credit run at a dealer or mortgage broker is 14 days from your first inquiry.
So if your apply for an auto loan on the 1st of the month you can go to a several other dealers over the next 14 days and have them run you credit and only the first inquiry will affect your score. Then same holds true if the dealer submits your application to several lenders for approval your score isn't going to get killed each time they submit it. Understand that your score will be affecte about 5 points at dealer and about 5 points at mortgage broker because they are considered separate transactions.
If during the process of getting a car loan or mortgage loan your credit is run 8 times during that initail 14 day period all 8 credit inquires will show up on your credit however your score will only be hit for the first inquiry. Just because their is this time frame allowed to due some shopping this is not a pass or excuse to let everyone and their brother run you credit. you should always try to limit the number of times you run your credit. Even if all of the inquires that hit your credit bureau do not drop your credit score, they can have an effect on your loan process because most banks look at the number of recent inquires and the number of total inquires.
When a bank refers to the number of recent inquires on your credit they are talk about the number of times your credit has been run in the last 6 months. Every bank has a different tolerance for how many credit inquires that they except or like to see in the last six months. The fewer inquiries in the last six months the better.
When a bank refer to the total number of inquires they are referring to the total number of credit inquires that are reflected on your credit bureau. Normally credit inquires can stay on your credit up to 7 years. You can easily rack up a ton of credit inquires buy appling for loans all of the time.
The moral of the story is when authorizing your credit to be run be fugruall about it. Don't run your credit all or the time or just because your are going to get 10% of your purchase at the department store. Every time you run your credit for credit cards or other lines of credit it is looked at like a single transaction and will drop your fico score. So be stingy about who you let run your credit and how often.