Dear Credit Card Adviser,
I just read the article by Pat Curry on how credit scores are calculated. It helpfully answers many issues, but I would appreciate getting an answer to the following question:
The writer lays out a number of factors that are included in the credit score calculation and also identifies factors that are not included. The writer makes clear that inquiries made to credit bureaus in connection with applications for credit are factored into a credit score. I would like to know whether routine inquiries made to credit bureaus by lenders (often on a frequent basis) to review a borrower's credit report are included as a factor in calculating the borrower's credit score. In other words, are inquiries that do not involve applications for new credit taken into account when a credit score is calculated?
-- Jonathan
Dear Jonathan,
Sometimes credit checks not triggered by an application for credit may still generate the kind of inquiry that can influence your credit score. All recent credit inquiries appear on your credit report, but only "hard" inquiries or pulls appear to creditors and affect your score. "Soft" inquiries do not impact your credit rating.
"The general rule is if it is an inquiry that indicates that you may be taking on additional financial obligations (it can impact your score), because that could be meaningful to your risk of being able to repay other debts," Maxine Sweet, vice president of public education for Experian, says in an article on Bankrate.com.
In other words, financial applications unrelated to credit, such as those for a new cell phone, apartment rental or savings account, can prompt a hard pull. An inquiry related to a job application or your own request to see your credit record does not suggest that you are shouldering new financial commitments, and won't factor into the next calculation of your score.
"Routine" inquiries from existing creditors for account reviews do not affect your credit rating. In addition, lenders that screen you for "preapproved" offers of credit are generating only soft inquiries that won't harm your credit score.
FICO, the company that developed the FICO score, sums it up on its consumer website: "A FICO score takes into account only voluntary inquiries that result from your application for credit."
For more information on the subject, I urge you to read my article, "How credit inquiries affect credit score."
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