The answer depends on how you go about making multiple loan inquiries. But if you do things wrong, it will definitely hurt your score. Below are a few scenarios. Useful tips and techniques will also be discussed in order to prevent or minimize any damage to a consumer’s credit score.
You might not know this, but natural and juridical persons pull out credit information on every consumer on a regular basis. These are credit inquiries conducted WITHOUT your permission. As such, they do not hurt your score, regardless of how many times it is done. These are called Soft inquiries.
These are credit inquiries conducted WITH your permission. The waiver is usually included in most credit related applications i.e. credit cards, auto loans, home loans, etc. These are called hard inquiries. One or two inquiries will not really lower a credit score. However, dozens of inquiries over a span of several weeks will! This usually happens because a consumer is careless and keeps signing waiver after waiver when he/she shops for the facility of credit.
It’s My Right to Shop Around!
Yes it is, and the law recognizes that. This is the reason why credit bureaus are prohibited from including in the computation several or dozens of inquiries made over a short period of time that seem to be related. A short period of time varies. The safest would be 1 to 2 weeks tops. However some experts believe that the credit bureaus look at the inquiring entities. If it seems a consumer is shopping around for a specific loan, then the same is treated as 1 hard inquiry. This is called de-duping.
Realistically Speaking (Score Wise)
It takes a lot of inquiries to substantially dent your credit score. A dozen or two will not really hurt you much, even without de-duping. As a general rule this is a low priority item on the computation. By way of exception, its significance increases if the consumer lacks information on the other categories i.e. credit history, types of credit, if the consumer has a significant amount of debt.
Inquiring Entities Look Beyond the Score
In some cases an inquiring entity will look beyond the score and look at credit inquiries as a specific criterion. In this case the same gains a different significance. That is why, as much as possible it is a good idea to limit consented inquires.
If you must shop around for a loan then do it right, take advantage of de-duping. For example, Mr. A wants to purchase an automobile. The best way to go about this is to conduct the initial research. Make sure about his financial capacity first and then start with one or two requests for pre-approval. If the results are positive, well and good. He can shop around with several other lenders in the span of 1 week. If the lenders disapprove the application, then Mr. A better step back, assess the situation and repair his credit score. The worst he can do is continue with applications, knowing it will most likely be disapproved. This will only waste him time, and put other creditors on alert, as to the reason why Mr. A keeps getting disapproved.