Credit Usage Ratio
Credit Inquiries/New Credit: Brief Synopsis
- Soft credit inquiries do not affect your score, unlike hard inquiries
- Similar inquiries within 45 days are grouped as one inquiry
Credit Inquiries/New Credit: Full Explanation
First let’s talk about credit inquiries. There are two types of credit inquiries: Soft credit inquiries and Hard credit inquiries. Soft credit inquiries have no effect on your credit score. Soft credit inquiries include: when you check your own credit report, when a current creditor checks your credit report, or a potential creditor wants to scope you out without your permission.
A hard credit inquiry will affect your credit report. A hard credit inquiry is generally when you are applying for credit, such as a mortgage, car loan, or credit card. There is an exception to the hard inquiry rule for mortgages and car loans. If you apply for a mortgage today, then that inquiry effect will not be factored into your credit score until 30 days later. This is also true for a car loan inquiry.
Another significant rule for a mortgage and car loan inquiry is that all inquiries of the same type within a 45 day period are grouped together and counted as one inquiry. Let’s use an example. Today is day one, and you apply for a mortgage. First, as we just learn the inquiry itself, will not adversely affect your credit until day 30. Now if you have your credit checked by a different bank every day for the next 45 days it will still count as 1 inquiry. Remember all mortgage inquiries count as one within a 45 day window (this allows you to shop around for the best rate. Now if you have another bank check your credit on day 46, then that will count as inquiry number 2 and start a new 45 day window. The same 45 day window holds true for a car loan inquiry.
Another aspect of your score in this section is the time since the last inquiry, the time since the last new account was opened, and the re-establishment of positive credit history following past payment problems.
This section accounts for 10% of your score.