Is there a real reason why an inquiry drops your credit score.

[Howaboutthat]

Speaking as a person with very good credit, I don't know and can't understand why this happens. I did a little research and everything point to the creditors and uncertainty about your file. If your score is in the 800's why would there be any uncertainty from the creditors. You pay all your bills on time (maybe in full) your utilization is good and it's all laid out for the creditor to see. 

Because they can is the only explanation I can tell. 

Rant over, and yes I do feel better now. 

[SouthJamaica]

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@Howaboutthat wrote:

Speaking as a person with very good credit, I don't know and can't understand why this happens. I did a little research and everything point to the creditors and uncertainty about your file. If your score is in the 800's why would there be any uncertainty from the creditors. You pay all your bills on time (maybe in full) your utilization is good and it's all laid out for the creditor to see. 

Because they can is the only explanation I can tell. 

Rant over, and yes I do feel better now. 

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If it's any comfort, I agree with you 100%.  The idea that someone who occasionally applies for a new credit product is more risky is absurd.

How is one supposed to get a mortgage or an auto loan -- or even get an apartment or a new cell phone deal -- without a hard pull?

I can see building something into the algorithm to penalize massive credit-seeking behavior, but there should be no penalty for occasional credit-seeking.

[chuckwood]

You have a very good point. If a person has not shown even a developing sign of a slip up, exessive seeking or debt why should it matter. A good score and payment history with low utilization should be all that matters.

[Xyta]

I personally believe it is to discourage consumers from being educated about the market - they don't want people shopping around and peeking behind the smoke and mirrors. 

there is a **small** argument to be made that a hard inquiry grants visibility into recently approved credit during the reporting lag from approval to the first cycle of reporting - but to your point, in a near perfect file, the impact therein is minimal (and thus, the HP ding is right-sized) 

[tnhomestead]

People with 800 plus scores do go bankrupt. If your (Mod cut - not here, please @tnhomestead - please be mindful of the TOS) habit is now out of control, so you want to apply for 50000k in credit cards and loans that you can't repay,  that little hit per loan will, they hope, signal other lenders to stop before its to late. Fico scores are not to show if you pay your bills, but to offer risk assessment to lenders. That's why I get dinged for having paid off 200k in real estate. And having paid off cars. Both should show I am stable and can pay my bills. But to the fico score they are both dings.

[coldfusion]

This is kind of a long read but the context is pretty relevant.

https://www.consumernotice.org/data-protection/mining/

The reason these events matter is because previously mined and correlated data demonstrates that they do matter. 

We see new scoring versions and types introduced because development of new models, increases in amount of data, and improvements in data veracity are continuous and ongoing works in progress.

[GatorGuy]

Of course I agree that there shouldn't be punishment for responsible credit use. However as Coldfusion put out there, there evidence has shown slight increases in credit risk with each credit pull. Thus the small drop. And never forget that the FICO scoring exists for the lenders, not for us.

FICO scoring is also only one piece of the puzzle. Each time they pull our credit they get the full report and they can decide how to weigh all the pieces completely differently than FICO scoring.