Each time you apply for new credit, the creditor puts an inquiry on your credit report. You might not think it’s a big deal, but it does affect your credit score. If you have too many inquiries, it could seriously damage your credit score.
So how long do these inquiries stay on your credit report? Typically, they stay there for two years. This doesn’t mean they affect your credit score for two years, though. They will immediately affect your credit score upon reporting them, but the effect then begins to wear off. Because they remain there, though, any new lenders will see the inquiry for at least two years.
How Hard Inquiries Hurt Your Credit
Each hard inquiry made on your credit report costs you five points. Typically, five points won’t do much to your credit score. Unless, of course, you are in the border of a minimum credit score requirement and the five points drops you below it. Then you may find that the inquiries hurt you.
Another way inquiries can hurt is when your credit history is fairly new. If you don’t have a longstanding history for lenders to look at, all they will see is your new credit and the fact that you may have even more new credit out there based on the inquiries.
If your credit is new, you need to give your credit time to ‘age.’ While you wait, you want to keep your inquiries to a minimum, your outstanding credit low, and your payment history timely. This will help you increase your chances of having a high credit score as you wait for your credit history to age.
Remember that every time you open a new account, you lower the average credit age on your credit report. This can lower your credit score. If you combine the new inquiry penalty with the lower credit age, you could seriously damage your credit score without really trying.
Multiple Inquiries May not Hurt Your Score
One area that you may not end up with a damaged credit score is if you have multiple inquiries. These multiple inquiries must be within the same industry, though.
For example, let’s say you are shopping around for a mortgage. In order for you to get qualified quotes, you need to let the lender pull your credit report. Each time a lender pulls your credit, though, it counts as an inquiry. Luckily, the credit bureaus recognize the need to shop around. They will only hit your credit report for one inquiry if you shop around within a 4 – 6 week span.
Keep in mind that this doesn’t mean that if you apply for a credit card, mortgage, and car loan all in one week that you’ll only have one inquiry. These businesses aren’t in the same industry. You’d get hit with an inquiry for each one, which can damage your credit score.
Minimizing the Effects of an Inquiry
If you do need to shop for new credit, make sure you maximize your credit score before you start. This way when a lender pulls your credit, the five points the inquiry costs won’t affect your credit score much. Before you apply, try to:
- Make sure all accounts are current
- Pay down any large balances
- Make sure that your revolving debt and installment debt accounts are balanced
- Make sure your accounts are ‘aged’
- Don’t open any new accounts
If when you look at your credit report you notice accounts that don’t belong to you or other erroneous information, make sure you report it to the credit bureau. They must react to your inquiry and find out the truth of the matter within 30 days. If the ruling works in your favor, it could help increase your credit score even further.
Inquiries do stay with you for at least two years, but that doesn’t mean they’ll affect you negatively for the entire 24 months. Know how to handle your credit and how to keep it in good shape so that you can get the best rates available to you.Click to See the Latest Mortgage Rates»