Dear Dr. Don,
Seven credit inquiries were generated when I took out a loan on a car I purchased in June 2007. Recently, I noticed on my credit report that all seven inquires are listed. However, they were all for the one car loan. I am trying to see if I will be able to get the others removed, as the car loan is with CitiFinancial.
I heard that all the inquiries for the car loan are only supposed to be counted as one inquiry, so why can't the other inquiries be removed? I would appreciate any information you could give me regarding this matter.
-- Linda Loanshopper
When you're comparison shopping for a car loan or a home mortgage, multiple loan applications that are grouped together in a short period of time don't negatively impact your credit score. That's because it's obvious that you're comparison shopping and that you don't plan on taking out seven car loans -- or seven mortgages.
To keep comparison shopping from negatively impacting your credit score, the loan applications should be within the 30-day period prior to scoring. The myFICO.com Web site has a page devoted to credit inquiries that includes a section on comparison shopping and your credit score.
That doesn't mean the only inquiry remaining on your credit report should be the one from the lender that provided the loan. The fact that you comparison shopped for the loan is a part of your credit history. It shouldn't be erased.
I asked Craig Watts, the public affairs manager at Fair Isaac Corp. to explain how your car loan shopping last June impacted your credit score today. Here's what he had to say:
"The FICO score does ignore all auto credit inquiries posted within the previous 30 days. Let's assume her seven inquiries all occurred within 30 days. Her FICO score during that time would have ignored those auto loan inquiries. However, as those inquiries age, they are dealt with by a different buffer in the scoring formula. This buffer groups any two or more auto loan inquiries that are posted within a 45-day period, then it tells the scoring formula to treat them as one inquiry. In her case, those seven inquiries occurred within a 45-day period, so the formula would regard them as a single inquiry. That single inquiry could lower her score slightly, since inquiries considered by the formula typically reduce the person's score by five points or less."
The good news is that, while credit inquiries stay on your credit report for 24 months, they are only used in credit scoring for the first 12 months. Your loan shopping last June won't influence your credit score come this July.
Keep in mind that the credit report you see is more detailed than the credit report that a prospective lender would see. Your credit report shows all credit inquiries, including marketing and account maintenance inquiries, while the credit report a lender sees can show only credit inquiries that you triggered (so-called hard inquiries) by applying for credit.