How Do Credit Inquiries Affect My FICO Credit Scores?

A new loan or credit card application provokes lenders, landlords, investors and FICO to “inquire” about the nature of the said credit. This phenomenon is known as an inquiry, which has a fair potential of affecting your credit score. A general rule of thumb suggests signing up for free FICO credit score report on bi-yearly basis. This is to give you an idea about your current credit score, before you end up with another “credit card”.

Yes, inquiries do impact credit score and like all other organizations, FICO also has a way of evaluating inquiries. Generally speaking, a new credit card or credit application is considered as a risk by loan sharks. Since lenders don’t want a liability at hands, they’ll either handover loans with strict terms or plainly refuse to give it. In both cases, you’re going to lose. Of course, the first option seems a little “viable” but you’ll have a hard time meeting payback and heavily imposed compounded interest rates.

To what extent does an inquiry affect MyFICO credit scores?

  • If you have a good credit clearance history, signing up for another credit card or loan, will not affect your existing credit score that much. A greater impact only occurs, in case of multiple accounts with default cases.
  • Filling in an application form for a new card, just to shed off old loans, will decrease the credit ratings. FICO will deduct points accordingly, and you’ll have to abide by higher interest rates from landlords, utility corporations, online retailers, subscription based services and etc.
  • Inquiries from client’s side that pertain to free FICO credit reports, do not affect anything.
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In case a 3rd party makes a credit inquiry that doesn’t involve a client’s consent, the phenomenon will be touted as a “soft inquiry”. These inquiries are involuntary, which are only run to get some background info. Lenders, banks and prospective employers normally opt for this sort of thing.

On the contrary, announced or voluntary credit inquiries are marked down on a credit consumer’s report.

  • Student Loan
  • Auto Loan
  • Mortgage
  • Installments that involve cell phone contracts and cars
  • Private loans

All of the above loans are hazardous in case the consumer is headed for them in multiples. Such inquiries slice through the credit score like a knife. Sooner or later, the consumer is red flagged for all sorts of future business transactions. A debt consolidation company would seem to be the only option from this point onwards. As a side note, never ever go for credit card cancellation process while it’s in the middle of payment hassles.