How many points are taken off your credit score when a credit check is done?
Question by bendavis19792003: How many points are taken off your credit score when a credit check is done?
Best answer:
Answer by housemouseref
It depends on what type of company pulled your credit. Example, if you are shopping for a car loan, supposedly, you have up to 5 credit pulls within a 30 day time frame during which your score will not drop. It also depends on how solid your credit score is to begin with. If you have great credit with no lates, it probably won’t pull the score down. What type of credit are you shopping for?
Know better? Leave your own answer in the comments!
It all depends on who is doing the checking. If you were to pull a credit report on yourself it has no affect on your score. If you are applying for financing for a home purchase or re-financing you can shop arround for 2-3 weeks and not have it adversly affect your score. The fico scoring system now can tell if someone is looking to get a better deal or overextend themselves with credit. Also when you receive offers of credit from lenders They often do a “soft” inquiry those have no affect on your score.
As already mentioned, here are most of the variables: hard / soft inquiry, type of credit sought (house, car, credit card), and lastly (not mentioned yet), how many hard inquiries do you already have.
One of the bureaus (I think experian, but don’t quote me) has a model which you can play with if you have joined their credit monitoring service.
In this model, it suggests that more than 0 inquires will drop your score 1 to 2 points. Do between 2 and 3 hard inquiries per year and you will see reduction in your score by a few more points (say about 3 or more). Whereas, if you have 4 to 6 inquires, the points are more likely to drop 5 to 7. And finally, if you have more than 7 inquiries in one year’s time, then your score drops 10 to 15 points (maybe).
After the top end of 7 inquiries within a years time, I believe whether it is 7 or 22, your score does not continue to drop.
And one last note: it has been said, if your score is high, it won’t drop that much.
True and false all at the same time.
What is high? If your score is 721, and you do even one hard inquiry, a drop of 2 points could put your score to 719, and now you have just gone from get just about any credit you ask for, to less than perfect credit where interest rates change. On the other hand, if you have an 820, a drop of 3 points is inconsequential.
Similarly, if you score is 620 (not high) a drop of even one point could actually cause you to be disqualified altogether. E.G. US Bank general criteria says you must have a min. score of 620 to even be considered for a home equity loan.
So while it is true that shopping for credit has become better in terms of scoring/inquires, some credit sources may not key it as they should and it will not necessary come across to the bureaus that all inquiries were (same purchase) related, and you will end up with several hard inquiries and a considerably lower score.
Why? Because take for example the consumer who “thinks” he is shopping around by applying for credit at Sears, Circuit City and Best Buy.
Each offer credit, each say they will give you a gift and a 10% discount on the washer you are thinking about buying if you open up a charge account.
So, you say, what the heck. I’ll just see who gives me the best deal. And it turns out Circuit City has the best deal. No payments for 6 months, 10% off the already sale price, and a free visa gift card valued at $ 50. So you “shopped” around. Right?
Wrong.
If you had them pull your credit, and you decided to buy there, on those terms, you just qualified your file as a sub-prime borrower because as far as I know, credit bureaus penalize you for participating with any sub-prime lender–which by the way, yep you guessed it, no payments for 6 months funding is all through SUB-PRIME LENDERS.
Now, they are supposed to be fixing this flaw, but to my knowledge, they have not!
And one more thing, while I am on the war path….
Even though you never “bought” at Sears or Best Buy, they sent you out a card anyhow, and the bureaus are now going to count those “shopping” inquiries as hard inquiries which DO COUNT AGAINST YOUR SCORE.
You see, the “system” in terms of counting works for mortgages or car loans–but not so full proof with other types.
Suggestion: You want to shop around, take your credit report (a tri-merge please) to those who you may consider doing business with. Tell them, before they even get a chance to quack, “I know that you will have to run your OWN REPORT, but based on my “score” (that is all anyone cares about today anyway–nobody actually reads your file, unless they don’t like your score) is your credit dept. likely or unlikely to approve this new credit account.
In which case, the clerk will say, “Well, let’s just do an inquiry and find out.” That is where you say, “No, let’s don’t. Rather, put me in touch with your credit approval dept., and I will ask, or I will shop somewhere else. Interestingly, 1 of 2 things usually happens…. 1) you get to talk to someone who really knows, or 2) you have to go somewhere else. Either way, you have not lost anything, you did not get a useless inquiry and you HAVE “used” the system to get the best price, communicate that you are a serious shopper, and that you are not going to be led around by the nose… the beginnings of getting a better deal.
THEN, after you truly “have” shopped around, and you know what your CASH price will be (along with spiffs), then and only then do you apply for the credit–and of course, you only apply to the place that has indicated with your score it will likely be approved. If all places are unlikely based on talking with the credit manager, your best bet would be to work on improving your score before going out and making it worse.
And do bear in mind, that the score that ScorePower (Equifax) and other scores you may have access to, is not even the same score that Mortgages will use, Car Lenders will use, etc. Is not that the dumbest thing you ever heard? In fact, often, the scores used by these companies will (you guess it) be lower than the ones you are confidently walking around with. Why? Oh, I suppose that way they can say, “Whoopsi, you score is not high enough, we need to charge you more in interest.”
In other words, don’t immediately assume the score you have is the score they will get. Assume that your score is about 10 to 40 points higher than the score they will use. And remember, there are different scores for each different bureau. So asking which bureau the credit dept uses can also give you a clue as to what score will be applied. Even your 3 scores will vary as one bureau weights more heavily in ways that another won’t. Even the different scores have slightly different meanings. For example, you can have a 650 in Experian while the same exact info in Trans Union will be 665, while the credit dept’s score they get on you for Experian will be only 632.
So, the last and final advice… get your scores high, and never let them go down. This means make your payments on time, don’t have too much, too little credit, and stick with your creditors (reducing the need for more inquiries) and only do an inquiry when you KNOW for sure the credit will be granted. That way, at least, you are not out there wasting inquiries.
If you feel this is not possible, then, clearly you need to improve your credit score, and all this talk is rather putting the cart before the horse. It took me years to figure that one out, and until I did do something about my credit, I was Sh** outta luck, and being beaten to pieces scorewise.
Good Luck, and I hope this helps.