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Ten percent of your credit score comes from applications made to your credit report. Each time a creditor or a lender takes a look at your credit report to determine whether or not to extend credit to you an additional inquiry is placed on your credit score.
If you've checked your credit report lately, you might have noticed that there are several inquiries from businesses you might not have heard of. Not all of these inquiries have an effect on your credit score.
The inquiries that are included in your credit score are those from your own applications for credit. When you make an application for a credit card, auto loan, or mortgage, you have given the lender permission to look at a copy of your credit report. This action places a voluntary inquiry on your credit report. Those inquiries that you initiated by applying for credit are the ones that affect your credit score. More... / Hide...
Other inquiries that might appear on your credit report do not count towards your credit score. These inquiries include those made by prospective employers, businesses that you already have credit with, business seeking to offer goods or services to you, and your own requests for credit reports. While these inquiries do appear on your version of the credit report they aren't included in the calculation of your credit score. If you didn't apply for credit for an inquiry that appears on your credit report, then it's very likely that the inquiry isn't included in your credit score.
Shopping around for the best rates on mortgage or auto loans doesn't hurt your credit score, if the shopping is done within 45 days. All mortgage and auto loans made within a certain span of time are treated as a single entry by the credit score calculation. Note that some lenders might choose to use an older version of the credit score calculation that reduces the shopping span to 14 days.
Depending on the information already in your credit report, your credit score might not decrease at all when you make an application for new credit. If you have a longer credit history and more accounts, your credit score usually won't decrease all from a new application. If it does decrease, it won't be by more than a few points. Additional inquiries have the greatest effect on people who have short credit histories and only a few accounts.
Although credit inquiries will remain on your credit report for two years, those made within the past six months have the greatest impact on your credit score. Even so, since inquiries only count for ten percent of your credit score, your score won't decrease by very much when you made an additional inquiry.