“Hi John – I know it’s a good idea to shop around for the best interest rate on a mortgage. I also know that I can shop around for a good deal on a car loan. I’ve read enough of your articles to know how FICO credit scoring treats the inquiries associated with auto loans and mortgages. I know I’m protected because of the 30 day rule. What I don’t know is whether or not I can use the same shopping strategy when I’m looking for a credit card account. Can you help?”
My answer – The inquiry logic built into the FICO scoring system is one of the most difficult things to explain gauging from the funny looks I get when I’ve explained it countless times over the years. Just to clarify, the 30 day rule is actually a 30 day and 45 day rule. 30 days from the date of the inquiry the FICO score ignores that inquiry. 45 days is the de-dupe period and multiple inquiries during any 45 day period are treated as one. This logic applies to mortgage, auto and student loan inquiries. And finally, this logic only applies until the inquiry turns 1 year old…then they don’t count at all.
Shopping for a credit card is a little different than shopping for an installment loan. When you go to a credit card issuer they won’t know what kind of deal to make (credit limit, interest rate) without pulling your credit. And, when you submit an application they’re under the impression that you want the card. If you are approved they’ve opened an account for you. That’s different than installment loans where you can actually get approved but then choose to NOT take out the loan, for whatever reason. Because each credit card inquiry can equal a new credit card you don’t get the same protection from multiple inquiries as you would in the installment loan world.
Here’s what I’d do…
If you want to shop around for a credit card you can still do so. There are a variety of websites that act as credit card strip malls. You can compare cards to each other based on things like rewards, fees, and interest rates. You can do all of this without applying for any of them.
Once you’ve decided that card “X” looks to be the best fit for you, then you can pull the trigger and submit an application. I’d caution you however to not fall in love with a card simply because of the potential interest rate. That rate is only important if you carry a balance from one month to the next. And, if you’re planning on doing that then I’d suggest you don’t need a credit card because that’s a poor financial move that is extremely expensive.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.