The time frame during which you apply for credit can have a huge impact on your score, because just the act of requesting credit can negatively your credit score. If you have several checks on your score, you could do significant harm to your creditworthiness. Not all credit checks will impact your score and you can soften the blow of multiple credit checks by looking for the best rate.
Identification
Credit checks can have a small but negative impact on your credit report. Hard inquiries coincide with an application for credit initiated by the potential borrower. Multiple inquiries have an escalating impact on credit scores, because financially distressed people tend to put in several applications loans in a short period of time. Soft inquiries, however, are performed secondary use, such as for an apartment rentals or pre-approved credit offers.
Effects
A single hard inquiry does no more than five points of damage to a credit score. However, multiple credit checks could make you unworthy of credit. Having six or more inquiries on a credit report coincides with an 800 percent increase in the chances of a person filing bankruptcy compared to someone with no inquiries, according to data from the Fair Isaac Corporation.
Benefits
Having multiple inquiries on your credit report can be a good sign to a lender, even though the inquiry dings your score. Multiple credit checks within a short window of time---usually within 14 days---looks like you are rate shopping and a responsible borrower. Once the inquiries become 30 days old, the FICO scoring model lumps them into a single inquiry.
Tip
When shopping for a loan, fill out your applications and submit them all at once, instead of one at a time. Also, review your report periodically for unauthorized credit checks. If you did not sign a consent form, a lender usually cannot check your report. You can remove any erroneous inquiries by contacting the lender or disputing the item with the credit rating agency.
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