Number of Inquiries

[Anonymous]

My issue is how FICO counts inquiries.  How am I supposed to build good credit if I am not allowed to apply for credit?  Every inquiry counts against my score.  This is unfair and has no reflection on my credit worthiness.  How do I keep people from making unauthorized inquiries?  Although Fair Isaac says that unauthorized inquiries don't count, THEY DO COUNT.  My credit report has zero late payments, my balances are not too high, and my debt to income ratio is very good.  The only reason I have a low score is the number of inquiries on my report.  I have had the same, dependable, good-paying job for the past six years, I have lived in the house I own for the past five years.  I am nowhere close to bankruptcy or default on any debts, yet my score remains artificially low because of the number of inquiries, half of which I DID NOT AUTHORIZE.  I would like to hear from people who have similar experiences -- otherwise good credit, but "too many" inquiries.  I think some sort of clas?sac*tion is in order. 

[MidnightVoice]

What do you call a "low" score?

[Anonymous]

First, welcome to the forums. You will find many helpful people here to answer most of your questions. I highly recommend that you read the Credit 101 sticky thread. It's extremely helpful.

You have a few false/questionable statements that I want to start to clarify for you.
"This is unfair and has no reflection on my credit worthiness" - Oh, but it does reflect on your credit worthiness. Creditors get nervous when people take on lots of new credit in a short amount of time. And rightfully so. Look at it this way. If someone in your office went around borrowing money from people and asked to borrow $500 from 8 other people and then asked you for another $500, wouldn't you start to wonder how they are going to pay all those people back AND pay you as well? You would be a little nervous about loaning out that $500.

"Although Fair Isaac says that unauthorized inquiries don't count, THEY DO COUNT." - You seem very convinced of this so I won't be the one to argue it with you. However, I am curious as to what unauthorized inquiries you are referring to. Please share.

"my debt to income ratio is very good" & "good-paying job for the past six years" - FICO scoring doesn't look at debt to income. They don't know how much you make. I know people who make $25,000 a year and can handle their credit in much better ways than people who make $250,000 a year. Just because someone makes good money, doesn't mean they will handle their credit responsibly.

"my balances are not too high," - What is your util%? For more info, read Credit 101.

All that being said, inquiries don't typically effect your score by very much. Even when you have a lot of them. And they will stop effecting your score after one year.

[Anonymous]

1.  I am not inclined to publish my credit score on a public forum, but let it suffice to say that number of inquiries has impacted it enough to push me into higher interest rates, which, of course is the goal of the credit industry.  What right-thinking capitalist would want to offer a 6% rate when they can find an excuse to bilk someone for 8, 10, 12% or higher?  This is what FICO scores are all about, giving banks the best opportunity to make the most money.  I have a bridge to sell anyone who thinks a FICO score has anything to do with clean-living or personal responsibility.

2.  I patently reject the notion that five inquiries somehow multiplies risk factors by five.  The person who really believes that five inquiries might mean I have just taken on five credit obligations has no clue about how credit systems operate today.  In the last year, I bought a car and refinanced my house.  Those two events netted about twelve inquiries on my credit report.  I tried to prevent multiple inquiries, but to no avail.  My only alternative is to write to each of the inquirers, inform them that I did not authorize their inquiries, hope they are nice enough to notify the credit bureaus that they really did not have authorization to conduct an inquiry (yeah, right), and then sue them.  Do I really have the time, patience, and stomach for all that?  No.  I shouldn't have to.  If we are going to accept living in a society where every time we try to do anything, like apply for a job, buy insurance, or go to the doctor, six or seven entities are going to look at our credit reports, then those inquiries should not be a factor. 

I go back to my original premise, which reveals the idiocy of this notion:  How is a person supposed to establish good credit, if the very act of applying for credit creates a negative mark? 

[Anonymous]

ro - a couple of points

1) FICO is not a perfect model nor can it be expected to be (its an imperfect world with imperfect people and formulas). What it does try to do is give a simple snapshot of your predicted ability to repay debt. A hypothetical score of 650 doesn't mean you are likely to default in the next 2 years....it simply means as an aggregate, people with that score are more likely to default in 2 years.

2) I am all for conspiracies, but banks are in competition. When I applied for an auto loan without a prior installment loan on record, banks came in with rates higher than I was expecting, yet one came in near a percent lower (they viewed me as a decent but not great risk) and competed for my business by offering a lower rate. There are enough banks out there that I think collusion is really not plausible in most instances.

3) Most of those inquiries may not count as auto and mortgage shopping will only count as a single inquiry if they occur within a short period of time. They will all be visible, but not all of them will ding your score point wise.

Best of luck to you in your credit endeavors

d

[Anonymous]

1. 5 inquiries will not increase your perceived risk factor by 5X. The scoring doesn't work that way.

2. As noted above, multiple inquiries for an auto loan during a 1-2 week period will all count as one inquiry.

A little knowledge can be a dangerous thing, or at least lead to unnecessary frustration.