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New Data Shows Inquiries Have Little Effect on FICO Scores

It's true that too many credit inquiries can have a negative effect on FICO scores, but my experience has been that most people focus WAY too much on this small factor in the FICO credit-scoring model.

In fact, I receive emails quite often from both readers and personal friends who are concerned about something as simple as applying for a new airline miles credit card because they're planning on financing a new home or a car in the next 12 months. Their reasoning is they don't want to risk taking any sort of unnecessary hit to their credit scores before applying for a major loan, and I completely understand that. I wouldn't apply for new credit within a month or two of closing on a home loan either.

However, the advice I've given has always been based on my belief that credit inquiries shouldn't really be a major concern for the average consumer. Not only do inquiries account for a small percentage of your FICO scores (10 percent), but the amount of points you could lose due to a credit inquiry is small when compared to all the other major factors considered by the FICO credit-scoring model.

While it certainly makes sense to avoid applying for a new credit card the month before you need to get approved for a mortgage, getting a new card six or 12 months in advance shouldn't be a concern. Even if it does have a negative effect on your credit scores, the effect should be minimal and your scores should also be able to recover as you continue building positive payment history.

FICO Shares New Facts About Inquiries and Credit Scores

I was excited to see that FICO recently decided to share some more facts with us regarding credit inquiries and their effect on FICO scores. Here are a few statistics, straight from the horse's mouth, that stood out to me as I read FICO's April 19th blog post:



  • "57 percent of consumers score the maximum number of points for inquiries; that is, inquiries are not a factor for at least 57 percent of consumers."
  • "Only 4 percent of consumers lose more than 20 points because of inquiries."

What should these numbers tell you? First, credit inquiries aren't even a factor for the majority of consumers. And second, if your scores are affected by the number of credit inquiries you've had, there's a very small chance it's causing a drop of more than 20 points. According to FICO, "if an inquiry does impact a score, it’s typically by a small amount— less than five points, on average." There you have it. For most of you, the number of credit inquiries you have isn't hurting your FICO scores at all. For the rest of you, not including a very small percentage of consumers on the far end of the spectrum, you might be looking at less than a 5-point drop on average for a credit inquiry.

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Joshua Heckathorn's picture

Joshua Heckathorn is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past twenty years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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