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Multiple inquiries hurt credit score

Dear Dr. Don,

Last year, I was shopping for a home loan through a mortgage broker. Now my credit reports show nine hard inquiries from various lenders. All have request dates within a four-week time period. Some of the lenders are even listed twice with different contact addresses. They also indicate purpose type as being used for a credit transaction rather than for a mortgage loan.

I was under the impression that similar requests were grouped as one or two inquiries. Plus, I was not aware I was being shopped to so many lenders. My credit reports indicate that this has indeed affected my score. Can this be corrected? How? -- Nick Numerous



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Dear Nick,
When you apply for a loan, the lender reviews your credit score and reports to one or more consumer reporting agencies, or CRAs, and it registers as a credit inquiry on your credit report with that CRA. Every lender could have requested a credit check with each CRA. Three loan applications could easily generate nine credit inquiries between the three CRAs. A mortgage broker will shop for a loan that's right for you, so multiple loan applications are expected. Asking the broker to limit the number of inquiries on your credit report doesn't really make sense.

The information in your credit report is used to calculate your credit score. Multiple inquiries for a secured loan, like a car loan or a mortgage, made within a short period of time aren't supposed to hurt your credit score, because it's clear that you are comparison shopping. Here's what the myFICO.com Web site says about multiple inquiries for secured credit:

Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

And:

Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you're only looking for one loan. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry. In addition, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping.

Fair Isaac & Company, or FICO, works with all three CRAs in computing their credit scores. A credit score from Experian is called an Experian/Fair Isaac Risk Model, a credit score from TransUnion is an Emperica® score, and a credit score from Equifax is known as a Beacon® score. So if myFICO reports that multiple inquiries aren't impacting your credit score in shopping for a mortgage you should be able to rely on that assurance.

Your credit report wouldn't show that these inquiries hurt your credit score; it's the credit score that reports the top positive and negative factors affecting it. If nothing much else is going on in your credit report these inquiries would show up as a factor without any specific notice of how they impacted your current credit score.

It will be an uphill battle to dispute the inquiries on your credit report. If you applied for credit and the lender reviewed your credit report, there's not much to dispute. It's not always possible from the inquiry information to determine whether a lender is considering you for a mortgage or a credit card. In writing this reply I reviewed the inquiries on my Experian credit report and couldn't distinguish between mortgage and unsecured credit requests.

You can go through the dispute process and try to have the reason for the inquiry included in the inquiry, but I can't handicap your success with this type of dispute. If you disagree with the results of a dispute you are entitled to include a personal statement on your credit report, and you can use that opportunity to explain the reason for the multiple inquiries. Bankrate provides a guide to the dispute-resolution process.

Credit inquiries stay on your credit report for two years, but it won't take two years for your credit score to start to recover from these multiple hard inquiries from last year's mortgage shopping.

Bankrate.com's corrections policy
-- Posted: Aug. 2, 2005
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