The five components that make up your FICO score and their contribution are: payment history (35 percent); amount you owe (30 percent); length of your credit history (15 percent); types of credit you use (10 percent); and new credit, which includes inquiries (10 percent). As you can see, inquiries are at the bottom of the list and tie with the types of credit you use. In fact, inquiries impact your FICO score less than five points on an average. Almost half of the consumers with credit scores have no inquiries on their credit report.
First what are inquiries? Inquiries are placed on your credit report when you are seeking credit. If you are shopping for a loan or credit card, an inquiry is placed on your credit report listing the company name and the date of the inquiry. If you are shopping for a vehicle, mortgage or consumer loan, multiple inquiries for these industries are combined within a 30-day time frame and counted as one. You are not penalized for shopping with a 30-day time frame for these loans. Most consumers shop around for mortgages, vehicles and consumer loans, so this is considered.
FICO released some interesting facts about credit inquiries:
49 percent of consumers had no inquiries, 24 percent had one inquiry, and 27 percent had 2 or more inquiries.
57 percent of consumers scored the maximum number of points for inquiries. This means that inquiries had no impact on the FICO score for at least 57 percent of consumers.
89 percent of the time, inquiries are not even one of the top four factors impacting the FICO score.
Only 0.4 percent of the time, inquiries are the number one factor that impacts the FICO score.
Only 14 percent of consumers lose more than 10 points because of inquiries. Only 4 percent of consumers lose more than 20 points because of inquiries.
Even though inquiries have a small impact on your credit score, the 5 to 10 points they contribute to your score could make the difference in the interest rate you pay and/or the monthly payment. If you plan to apply for a loan or credit card, you shouldn’t apply for new credit anywhere until you are approved for the loan or card. This will help keep you score as high as possible.