How the FICO Score Counts Inquiries

As explained in the last section, a search for new credit can mean greater credit risk. This is why the FICO score counts inquiries—requests a lender makes for your credit report or score when you apply for credit. FICO scores consider inquiries very carefully, as not all inquiries are related to credit risk. There are three things to note here:

• Inquiries don’t affect scores that much. For most people, one additional credit inquiry will take less than five points off their FICO score. However, inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: People with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports.
• Many kinds of inquiries aren’t counted at all. The score does not count it when you order your credit report or credit score from a credit reporting agency or the myFICO service. Also, the score does not count requests a lender has made for your credit report or score in order to make you a “pre-approved” credit offer, or to review your account with them, even though you may see these inquiries on your credit report. Requests that are marked as coming from employers are not counted either.
• The score looks for “rate shopping.” Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you’re only looking for one loan. To compensate for this, the score counts multiple inquiries in any 14-day period as just one inquiry. In addition, the score ignores all inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping.