Can too Many Inquiries Hurt Your Credit Score?

What happens to your credit score when you apply for a bunch of credit cards at the same time?

Normally this type of behavior can lower your credit score, but it really depends on your total credit profile. In this article we’ll discuss what actually happens when you apply for multiple loans at once.

A reader, Jace, recently wrote in to us asking this same question.

I was wondering, can applying for seven or eight credit cards at the same time hurt your credit score? I have excellent credit, but I would like to take advantage of some of the different miles and point promotions going on right now. I just don’t want to tank my score if i do.

Jace W

Consumers have often been told that multiple credit inquiries can lower their credit scores and completely ruin their credit. At one time, it may have been possible because high amounts of inquiries meant higher risk of default. It was believed that when someone was in trouble financially, they would go on credit card or loan application sprees to see who would approve them and then file bankruptcy or default on the loan.

Credit inquiries, however, account for a very small part of the credit score.  Your credit score is more heavily dependent on whether or not you pay your bills on time, how often you are late, the number of public records such as bankruptcy, judgments and collection accounts that you have on file.

What Are the Different Types of Credit Inquiries?

Credit inquiries are of course viewed differently and calculated based on the type of inquiry. There are what are called “soft inquiries” and “hard inquiries” and knowing the difference will help you understand which ones could affect your credit score and which ones basically don’t mean anything.

Soft Inquiries on Credit Reports

A soft inquiry on your credit report is an inquiry made when you request your own credit report or when a business verifies your identity in order to offer you something. This is also the type of inquiry that a credit card company makes before they send you a credit card invitation. Most often, it is simply to verify who you are.

Soft inquiries are not counted at all and do not affect your credit report or score in any way. If you view your report, you will see who has made soft inquiries and usually there is a note in the report stating that these inquiries do not affect your report to separate them from the hard inquiries.

Hard Inquiries on Credit Reports

Hard inquiries are the inquiries that are generally made by credit cards, mortgages and loans and these are for the purpose of viewing your credit history and determining if you are  worthy of the loan or line of credit that they are providing.

Mortgages and Car Loans

If you have multiple mortgage or car loan inquiries within a short period of time, these are often bundled together as it appears as though you are just credit shopping and looking for the best rate or offer. Although these pulls are hard inquiries, they do not affect your credit as multiple inquiries as long as they are all made within the same period of time, which is typically 45 days.

Credit Card Inquiries

Credit cards inquiries are considered hard inquiries, although they don’t often harm your credit. If you have one credit card inquiry it will probably not affect your score at all. These inquiries stay on your credit report for two years, but only the first year is counted in your score, and usually only the first 6 months make a difference. Inquiries affect your score according to the age of the inquiry; the newest ones will make the most difference.

So How Much Does a Credit Inquiry Affect a Credit Score Anyway?

Here is the breakdown of how your FICO score is calculated to give you an idea of how little credit inquiries count in configuring your credit score.

• Payment history accounts for about 35% of the credit score. This includes adverse public records such as bankruptcy, delinquent accounts, collection accounts, number of past due accounts and the number of accounts paid as agreed.

• 30% of your credit score is for amounts owed. This is the amounts of balances and the number of accounts with balances. The proportion of balances to original debt amount is also included in this 30%.
• 15% of your credit score is the length of credit history and time since the account has been opened. Older accounts are typically better than new accounts.
• 10% of your credit score depends on new credit; which includes credit inquiries and the number of recently opened accounts. Your credit score will be lower if most of your accounts have just been opened and if you have new credit inquiries. Credit inquiries however, may only account for about 7% of the credit score, but at the most 10%.
• 10% of your score includes the various types of credit you have. Things like mortgages, credit cards and installment loans. It is a good idea to have a mixture of different types of credit on your credit report.

Although you have excellent credit and the inquiries may not affect your credit score, it depends largely on what else is on your credit report. It is a good idea if you are able, to take advantage of the different rewards programs and sign up bonuses that are offered to new cardholders.

If you have a fairly new credit file or a very small number of accounts for example, eight new credit inquiries could potentially cause some harm. After all, according to FICO, people with 6 or more hard inquiries on their reports, are eight times more likely to declare bankruptcy.

In short, I would not suggest applying all at once for all of the credit cards as this is counted as eight hard inquiries which at the very least may affect your credit for six months. Start out with choosing the cards with the best time sensitive offers. In order to cut the risk, I would suggest applying for a couple at a time and waiting before you apply for more. If you spread out the applications over a period of time, the inquiries are not likely to affect your credit at all.