Are Multiple Hard Inquiries on Your Credit Report Rolled Into One If in a Short Amount of Time?

Hard inquiries are placed on your credit report whenever you apply for a credit-related service, such as a mortgage or credit card. A hard inquiry can harm your credit score, but you may have been told that you can minimize the damage of multiple inquiries by applying at several places in a short period of time. This is true, but you have to make sure it appears to be rate shopping. Your credit score also could be reduced if the lender uses an outdated scoring system.

Identification

When the credit scoring model detects multiple hard inquiries for a loan in short span of time, it considers all of them a single inquiry for rating purposes, according to Equifax. The credit bureaus do this, because financially responsible people typically shop around for the best rate.

Time Frame

There is a time span for multiple hard inquires to be considered rate shopping and, therefore, counted as just one inquiry. As of 2010, the FICO scoring formula used by the major credit bureaus and most lenders gives consumers 45 days to submit applications for their loans to be considered rate shopping. Lenders, however, may have an older version of the credit scoring software that allows only 14 days.

Warning

The credit score relief for rate shopping only occurs when you apply for credit that typically involves rate shopping, such as a mortgage, student loan or auto loan, according to Bankrate. Multiple hard inquiries for other credit, such as a credit card, or for utilities, such as a cellphone, do not have the grace period. All hard inquiries stay on a report for two years, but only count during the first year.

Tip

When hunting for a loan that qualifies for rate shopping, be prepared to submit all of your applications at once or as soon as possible to fall within the grace period. Also, you can run a credit check on yourself to see how many inquiries you have, so you can avoid having too many inquiries within one year. (A check on your own credit is considered a soft inquiry and does not affect your credit rating.) Data from the Fair Isaac Corporation reveal that people with six or more hard inquiries are eight times more likely to declare bankruptcy than someone with no inquiries.