There has been a lot of confusion on how Credit Inquiries impact a credit score over the years and part of the confusion comes from FICO (Fair Issac Company) changing their stance on inquires a number of times.  Initially, FICO felt that each credit inquiry could potentially be a loan and wanted to account for the potential of repayment of new debt and its’ impact on the score.  FICO studied this and noticed that when a consumer buys or shops for a home that there is usually 4 or 5 inquires – which they thought was good activity for the consumer, since they were shopping for the best loan and rate.  FICO wanted to encourage this for the consumer.

The first change was for all similar or same type of credit inquiries in a two-week window to be counted as ONE inquiry.  FICO later determined that two weeks was not enough time for the consumer to shop and expanded to 30 days…then to a 45 dayshopping window”, where we are today. 

In addition to expanding to a 45 day shopping window, FICO created a 30 day window of no impact at all.  For example, if the consumer is shopping for a home loan with 4 lenders in the next 5 days, all of the credit scores (from each lender) will NOT reflect a mortgage inquiry, because for the first 30 days, the mortgage inquiries will be ignored.  After the 45 day window, all of the mortgage inquires will be grouped together as one inquiry and will move through time together as ONE mortgage inquiry for a two year span.  After two years, the mortgage inquiry will drop from the credit report.

www.planomortgageguy.com

1 Comment

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