General Impacts to FICO® Scores

What are inquiries and how do they affect FICO® Scores?

Credit inquiries are requests by a “legitimate business” to check your credit.

Inquiries may or may not affect FICO® Scores. Credit inquiries are classified as either “hard inquiries” or “soft inquiries”—only hard inquiries have an effect on FICO® Scores.

Soft inquiries are all credit inquiries where your credit is NOT being reviewed by a prospective lender. FICO® Scores do not take into account any involuntary (soft) inquiries made by businesses with which you did not apply for credit, inquiries from employers, or your own requests to see your credit file. Soft inquiries also include inquiries from businesses checking your credit to offer you goods or services (such as promotional offers by credit card companies) and credit checks from businesses with which you already have a credit account. If you are receiving FICO® Scores for free from a business with which you already have a credit account, there is no additional inquiry made on your credit report.

FICO® Scores take into account only voluntary (hard) inquiries that result from your application for credit. Hard inquiries include credit checks when you’ve applied for an auto loan, mortgage, credit card or other types of loans. Each of these types of credit checks count as a single inquiry. One exception occurs when you are “rate shopping”. Your FICO® Scores consider all inquiries within a reasonable shopping period for an auto, student loan or mortgage as a single inquiry.

The relative information with a hard inquiry that can be factored into FICO® Scores include:

  • Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account.
  • Number of recent credit inquiries.
  • Time since recent account opening(s), by type of account.
  • Time since credit inquiry(ies).

For many people, one additional hard credit inquiry (voluntary and initiated by an application for credit) may not affect their FICO® Scores at all. For others, one additional inquiry would take less than 5 points off a FICO® Score.

Inquiries can have a greater impact, however, if you have few accounts or a short credit history.

Does applying for many new credit accounts hurt FICO® Scores more than applying for just a single new account?

The short answer is yes—applying for many new accounts often hurts your FICO® Scores more than applying for a single new account. There is no magic number of applications to which you should limit yourself. However, FICO® Scores consider recent inquiries less as time passes, provided no new inquiries are added.

Applying for a single new credit card may have a small impact to a FICO® Score, but if you apply for several credit cards, that can have a much greater effect on your FICO® Scores. Generally, rate shopping for home or auto loans will have less of an impact on your FICO® Scores than comparison shopping for credit cards or other types of credit accounts. A better practice when determining the best credit card is to read about the features of each card and then only apply for the one that has the features you want from your new card.

Is there a best way to go about applying for new credit to minimize the effect to a FICO® Score?


Applying for new credit only accounts for about 10% of a FICO® Score, so the impact is relatively modest. Exactly how much applying for new credit affects your score depends on your overall credit profile and what else is already in your credit reports. For example, applying for new credit can have a greater impact on your FICO® Scores if you only have a few accounts or a short credit history.

That said, there are definitely a few things to be aware of depending on the type of credit you are applying for. When you apply for credit, a credit check or “inquiry” can be requested to check your credit standing. Let’s take a look at the common inquiries you might find in your credit reports.

Credit Cards

If you only need a small amount, credit card companies will sometimes provide an increased credit limit (for accounts already opened). While a request for an increased limit may count as an inquiry just like opening a new card would, it won’t reduce the average age of your credit accounts, which is also important to your FICO® Scores.

If getting the limit raised on an existing card isn’t an option, then applying for the fewest number of credit cards will have the least negative impact to your FICO® Scores. For example, if a person needed an extra $5,000, getting one card with a $5,000 limit rather than two cards each with a $2,500 limit results in less impact to your scores. That’s because when applying for new credit cards, each application is counted separately as an individual inquiry in your credit file, and the more inquiries you have, the more that could hurt your FICO® Scores. Having more inquiries makes you look more risky to potential lenders.

Home, Auto, and Student Loans

FICO® Scores do not penalize people for rate shopping for a home, car or student loan. During rate shopping, multiple lenders may request your credit reports to check your credit. But FICO® Scores de-duplicate these and consider inquiries within a reasonable shopping period for an auto, student loan or mortgage each as a single inquiry. Doing the entire rate shopping and getting the loan within 45 days, will have no immediate impact to your FICO® Score.

Given rate shopping for home, auto and student loans has no immediate impact, why do you even see an inquiry in your credit files? While these types of inquiries may appear in your files, FICO® Scores count all those inquiries that fall in a typical shopping period as just one inquiry. So, again, doing rate shopping within a matter of weeks as opposed to a matter of months limits the longer-term impact to your scores as well.

Do employers use FICO® Scores in hiring decisions?


No.  While Federal law allows review of credit reports for the purpose of employment screening, FICO® Scores are not included with the reports.

Are FICO® Scores used in insurance underwriting?


FICO® Scores were designed to help lenders by rank-ordering consumers according to the likelihood they will become at least 90 days late repaying a creditor within the next 24 months. FICO® also offers FICO® Insurance Scores, credit-based insurance scores specifically designed for the insurance industry to help predict future auto and home insurance losses.

Are FICO® Scores unfair to minorities?


No. FICO® Scores do not consider your gender, race, nationality or marital status. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit. Independent research has shown that FICO® Scores are not unfair to minorities or people with little credit history. FICO® Scores have proven to be an accurate and consistent measure of repayment risk. In other words, at a given FICO® Score, non-minority and minority applicants are equally likely to pay as agreed.

How are FICO® Scores calculated for married couples?

Married couples don’t have joint FICO® Scores, they each have individual scores. The difference is that when you are single you usually only need to worry about your credit habits and credit profile. However, when you become married your spouse’s credit habits and credit profile may have an impact on yours. For example, if you have a credit card in both of your names and it doesn’t get paid on time, that can affect both of your FICO® Scores—and not in a good way.

Will spending less and saving more impact a FICO® Score?

While putting more money towards savings is usually a good idea, it’s not necessarily going to impact your FICO® Scores. FICO® Scores do not consider the amount of disposable cash (savings accounts, certificates of deposit or cash in your cookie jar) you have at any given time. Therefore, the amount of money you keep in savings doesn’t impact your FICO® Scores.

As far as spending less, that could have an effect on your FICO® Scores. For example, if you typically use your credit cards for purchases and you don’t always pay off the balance on those credit cards, then you may notice an impact in your FICO® Scores. FICO® Scores factor in the balance on revolving credit accounts (for example, credit cards).

If lenders have different lending requirements, how can I know if I qualify for affordable financing?

The surest way to get the most up-to-date and accurate information is to contact your lender for their FICO® Score requirements before shopping for credit. You can also check your current FICO® Scores so you’ll know where you stand in the eyes of these potential lenders.

Can accounts that aren’t in my credit reports affect a FICO® Score?

Though your FICO® Scores capture a pretty accurate picture of your credit history, not every account is recorded. Your good history of rental and utilities payments may not be listed in your credit reports. Even though your landlord, the cable and cell phone providers are pleased with your timely payments, this positive information may not be reported to the consumer reporting agencies. That being said, not paying these bills on time can have a negative effect on your financial health and your FICO® Scores:

  • Reported delinquencies:
    Even though your good payment history isn’t reported, if you go late on these bills, your landlord or utility department has the right to report your bills as delinquent to the consumer reporting agencies. If the bill continues to go unpaid, a judgment could be obtained against you in small claims court, and/or your account could be turned over to a collection agency. Any of these blemishes can then show up in your credit reports and can be as harmful to your FICO® Scores as the more commonly reported items such as late payments on loans or credit cards.
  • Future referrals:
    The next time you need to move, your potential landlord is likely going to require a copy of your credit report and a FICO® Score. In addition, he/she may want to contact your current landlord to check if you paid your rent on time. Even if you have a high FICO® Score, a potential landlord could choose another candidate if your current landlord reports that the rent is paid late or incomplete. As always, people who consistently pay their bills on time appear to be less risky to lenders and other types of creditors.

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