You may have heard that credit inquiries --- that is, someone looking at your credit report --- will have an effect on your score. In certain circumstances this is true, but not every inquiry has the same effect, and usually a drop in your score due to an inquiry is short-lived.
Credit Card Companies
If you apply for a new credit card, the prospective lender will check your credit report and score. This is the typical inquiry that will have a depressing effect on your score. The effect of one of these types of inquiries is slight -- amounting to five points or so. However, if you apply for several cards in a short amount of time, the effect is cumulative and can be more serious. This is because if you are applying for a large amount of new credit, lenders see you as a riskier borrower, more likely to default.
Unsolicited Offers
Often credit card companies will look at your report without your permission in order to send you an unsolicited offer. These types of inquiries have no effect on your score.
Rate Shopping
If you are about to take out a major loan, such as a mortgage or a car note, you may ask for quotes from several prospective lenders in order to get the best deal. All of these companies will check your report before giving you a rate. The credit bureaus are able to distinguish this type of rate shopping from other inquiries, and will treat all of these events as one single inquiry, with a minimal impact on your score.
Checking Your Own Credit
It's very important not to be deterred from checking your own credit report by fears it may affect your score. The credit bureaus do not penalize you for looking at your report, and your score will be unaffected. You can check your report from each of the three major bureaus -- TransUnion, Experian and Equifax -- once per year for free.
Landlords, Employers and Insurance
If you apply for a new job or want to rent an apartment, often the prospective employer or landlord will look at your credit report to get a picture of your financial responsibility. This type of inquiry has no effect on your score. The same is true if you ask for an insurance quote and the insurance company checks your report.
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