Does each credit inquiry bring my credit score down?

This is a question that, I think, will forever be asked by clients. From my experience a credit score will only go down for each “different type” of inquiry. When I say “different type” of inquiry, I am referring to different types of credit a person may be asking for. For example: If a consumer goes to the bank and applies for a bank credit card, then goes to a retail store and asks for credit from that retail store(i.e. electronic store, jewelery store), then goes and applies for a car loan, then applies for a mortgage, this might classify as 4 different types of credit. Please keep in mind that when applying for a car loan the dealer might use more than 1 institution to help with securring an approval. Each institution will pull the credit at least once. It is very common to apply for an auto loan and have 3 or 4 inquiries from that specific dealer. In my opinion, the credit bureau will group this as 1 inquiry, when calculating the credit score. Please also keep in mind that many retail outlets will use the same loan institution, so when you apply for credit at a couple different retail stores, the same institution might pull your bureau twice.This will count as multiple hits when calculating the score. Sometimes we hear this,  “every time you apply for a loan it brings your score down 3 points, so don’t keep applying.” This statement can be true and false at the same time. When it comes to car loans, this is false, unless you apply at ALOT of places that it’s considered “credit seeking”, or “credit shopping.” In my opinion, it would be completely unfair to penalize a client and their credit worthiness for simply shopping for a good rate. Let me run this one past you. If a person applies for a mortgage at 3 different banks, would it be fair to penalize the client 9 points for comparing approvals? The answer to that is NO. So, how that original statement is TRUE, is when you are, like I mentioned before, seeking credit in multiple different fashions. The Bottom line on this is only ask for credit when you need credit, or you feel it’s in your best interest. Lenders don’t like to see a client has been looking for credit constantly, or as we call it “credit seeking” or “credit shopping.”

Just my 2 cents.

Do you have any questions about credit seeking or inquiries?

-M