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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
Dear Linda,
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.
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