Applying for a credit card, home loan or auto loan typically includes the lender requesting a copy of your credit report to evaluate the risk. But, if you’re shopping around for the best credit card or car loan, can too many credit inquiries in a short time affect your credit? The short answer is, yes, but it’s dependent on things like how many inquiries your credit receives in a short period of time and the type of inquiry.

Learn how credit inquiries affect your credit score and consider some tips for how you can monitor it:

  1. How Credit Inquiries May Affect Your Score
  2. Practice Good Credit Habits
  3. Pay Attention to the ‘Status of Accounts’ Section

1. How Credit Inquiries May Affect Your Score

Credit inquiries can have an effect on your credit score, but not all inquiries are the same and it’s important to know the difference.

  • Soft Inquiry. An example of a soft inquiry: you interview for a job and your potential employer pulled your credit report as part of its screening process. This type of inquiry will not affect your credit score.
  • Hard Inquiry. An example of a hard inquiry: You contact your credit card issuer and request a credit line increase. The company pulls your credit report to help evaluate the risk of approving your request. This type of inquiry will affect your credit score.

If you’re trying to open several credit accounts in a short period of time (like a credit card, mortgage and a car loan), you credit score will likely go down.

But, if you’re shopping for the best rate on a single loan, for example, those inquiries are typically counted as one, minimizing their impact on your score.

Credit inquiries remain on your credit report for two years, but your FICO® Credit Score only considers the last 12 months.

Not everyone will be affected by a high number of credit inquiries in the same way, so it’s important to keep track of how many times you’ve applied for credit in the past two years to reduce the risk of your application being rejected.

2. Practice Good Credit Habits

It’s a good idea to try to practice good credit habits year round, but especially if you’re looking to take control of your credit score. Consider making these habits part of your regular financial wellness routine:

  • Pay your bill on time
  • Pay in full when possible
  • Keep track of credit balances
  • Avoid maxing-out credit accounts
  • Know your credit score
  • Monitor your credit report

3. Pay Attention to the ‘Status of Accounts’ Section

The status of accounts section of your credit report includes information on each account that’s reported to the credit bureaus. It states whether the account is currently open, and provides a comment on the account’s payment. Lenders may view this section to assess credit risk and determine interest rates on new credit applications.

Your closed accounts will also be listed, with a comment regarding how each account was handled by you while it was open. This will include your payment history on each account and the duration each account was open.

Some common account statuses on credit reports include:

  • Pays as Agreed: Account is paid in full monthly as per the terms of the credit agreement.
  • Paid/Closed Never Late: This account was paid in full with no late payments, but is now closed.
  • Account Paid in Full for Less Than Full Balance or Settled: This means that the account was not paid in full, or was settled for an amount less than owed. It may have a negative impact on your credit score.
  • 60 Days/120 Days Past Due: This denotes that an account is open but the minimum payment has not been received and is late. This account status may have a negative impact on your credit score.

Understanding your credit report and its contents is an important part of personal financial wellness. By monitoring your credit report, you can both ensure its accuracy and identify areas of weakness, like adverse credit statuses. In turn, you can take the necessary steps to help your credit score and present a better financial picture to those making inquiries your credit report.

Published March 23, 2016.

Updated May 20, 2020.

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