What Too Many Inquiries Means For Your Credit Report
A very common quote on a credit report is “Too many recent inquiries in the last 12 months”. But as you look through your report you only see a few inquiries listed. So how and why in the world is your credit report telling you that you have too many inquiries, and how is this really affecting your credit score?
Depending on your exact credit profile, there are a specific number of permissible inquiries which can be made before your credit sore begins to suffer as a result. Going over this limit will prevent you from having as high of a credit score as you could otherwise have, as well as the notification on your credit report that you have had too many inquiries.
If you are searching for new credit, then FICO can see this as a greater credit risk. This is why your credit score will count the number of inquiries. Inquiries are requests that a lender makes for your credit report or score when you apply for credit. FICO scores consider inquiries very carefully because some inquiries are not related to credit risk.
A single credit inquiry will typically result in five or less points being deducted from your credit score. However, having six or more inquiries will cause lenders to raise a red flag; those with multiple inquiries are 8 times as likely to declare bankruptcy than are those who have no inquiries on their credit reports.
Your FICO score regarding inquiries takes into account the following:
FICO scores know that people shop around more these days for credit, so they do take that into consideration and will distinguish between a search for many new credit accounts and rate shopping for one new account. FICO scores usually will distinguish between a search for a single loan and a search that you do for many new credit lines, in part by the length of time over which inquiries occur. When you need an auto or home loan, you can avoid lowering your FICO score by doing your rate shopping within a short period of time, such as 14 days. But be careful, because some research shows that opening too many credit accounts in a short period of time can increase your risk of hurting your score- especially if you don’t already have some well established accounts that provide great length of history.
Your FICO score looks at how many new accounts you have by the type of account (for example, how many newly opened credit cards you have). It also may look at how many of your accounts are new accounts. And how long since you’ve even opened any new accounts.
Inquiries remain on your credit report for two years, although FICO scores only consider inquiries from the last 12 months. It wants to know how many very recent requests that you have made for credit. FICO scores have been carefully designed to count only those inquiries that truly impact credit risk.
Your FICO score will ignore many inquiries entirely. These inquiries include your requests for your own credit report and score from the credit reporting bureaus, inquiries made when making a pre-approval and inquiries made as part of an employment screening process are also ignored in terms of your FICO score. All of these inquiries will appear on your credit report, but do not affect your score.
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