Home > 2012 > Credit Score

How Much Do Inquiries Affect Your Credit Scores?

Advertiser Disclosure Comments 1 Comment

How do inquiries affect your credit scores? That’s a question I recently posed to Tom Quinn on my radio show Talk Credit Radio. Tom’s a credit scoring expert with many years of experience, including helping to develop, launch and grow MyFICO.com. He also contributes to Credit.com’s blog. Here is an excerpt from that interview.

Gerri: Fact or fiction? Every time a person applies for credit it costs them 5 points off their credit scores. Is that true or false?

Tom: That is false.

Gerri: So what’s the truth about it?

Tom: Basically, whenever a lender touches your credit report, or if you’re seeking credit, then they usually will pull your credit report to understand your credit risk, and an inquiry is posted. So there are all these different kinds of inquiries out there.

For example, if you come home today and have a pre-approved credit offer in the mailbox, a lender probably pulled your credit report to do that and then there’s a certain code associated with it that can be identified as a” promotional inquiry”. Or, if you get a message on your credit card statement saying, “because of your great credit behavior we’re raising your credit line,” they probably pulled a credit report to do that as well and then an inquiry will be posted. If you go and try to pull your own credit report at myFICO.com for example, an inquiry is posted.

So the good news is, all those inquiries are tagged or identified separately so that the model can really isolate those credit inquiries that are related to you seeking credit, when you’ve actually applied for credit. When you apply for credit, what research shows is that people who applied for credit are riskier than people who haven’t.

But the good news is, inquiries don’t cost a whole lot of points in the big scheme of things. How you pay your bills and how you manage your debt is really what’s counted in the score. Inquiries will add a little bit of predictive value on top and may result in a couple points lost here or there. But the way the inquiry logic works, a couple of things: your inquiry is shown on your credit report for the last two years but that model’s only looking at inquiries in the last 11 months. So those a little older than 12 months, for example, aren’t counted.

And there’s a capping logic. Basically, the way the model works, is once you’ve reached a maximum number of inquiries for that particular score card, whether you have one more on top of that or 15 more on top of that, they don’t count extra against the score. So, in the big scheme of things Gerri, inquiries get a lot of attention by consumers but they really don’t cost them a million points. Really focusing in on paying bills on time as well as managing your debt levels is really what’s going to drive the score.

Image: Valerie Everett, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team