Inquiry Master Thread - understanding inquiries and how the affect your credit score

[Anonymous]

Hey Dragon,

Thanks. I appreciate and understand your concerns.

FICO credit scoring is anything but simple.

My intention for in my earlier post was to help focus on INQs and simplify how they relate to FICO scores. INQs are a matter where people appear to have an irrational concern about taking them due to a lack of understanding about them.

One INQ is not bad. One dozen INQs is.

My example for scoring was indeed unqualifed by scorecard, and scorecards do indeed matter.  I am not a scorecard expert, aside from: I know they exist; they are opaque in relation to the FICO algo; and that they provide situational scoring (clean vs dirty, thick vs thin, etc.)  

For those who are not aware of scorecards and want to learn more, here is a link:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Buckets-Scorecards/td-p/5069914

Post 5 has several descriptive diagrams that help to visually explain the principal and groupings for scorecards 

For reference, the scoring examples of INQs and new accounts on my account pertain to my individual scorecard, which is:

-Aged / old with more than 20 years of information

-"Thick" (not "thin") with a history of loans, mortgages and cards/revolvers, and with greater than 3 cards

-"Clean" (not "dirty" a reference to public records) and without any lates, BKs or derogative information

-Low utilization rate, usually about 6% 

Hope that all helps.

"The big thing you are missing in trying to assign points to the different scoring factors is the scorecard assignment. 

For example while the entire FICO range is 300-850 someone on a dirty score card will not be able to reach 850 (until their profile is clean) on the same note someone on a clean scorecard will never be able to reach a 300 (unless they get moved to a dirty scorecard). So in reality the scorecard assignment is going to set the min and max score possible for the profile in question. What the min/max is for every score card is unknown. "

[Anonymous]

@AnonymousFor fico version 8 there are 12 scorecards, not 8. There are 8 clean and 4 dirty. It is well known how the scorecards are assigned. What is not well known is the threshold points that segment them, because they are proprietary.

@dragontearsis correct that the scorecards make a big difference because they do have minimum and maximums and additionally, the ingredients to the slice of the pie are weighted differently based on scorecard.

Plus here’s something you probably didn’t know, inquiries also have other effects. For instance, if you have recent inquiries, it increases the signal strength of the penalties for number of accounts with a balance. So, by having a recent inquiry you will lose more points than you otherwise would for crossing thresholds for number of accounts with a balance. Who knows what other effects it may have that we don’t know.

Probably the biggest detriment, IMHO, of inquiries is that issuers see them. Too many inquiries and many issuers will not approve you, regardless of your score, DTI, and income.

There is one thing I wanted to point out about your post 49 I think it is. It may have just been a typo, but you talked about an inquiry for a CLI and then you talked about a new account penalty. There is no new account penalty for CLI. If you apply for a new CC and your youngest CC is over 12 months of age, then you are going to receive a new account penalty in addition to any AAOA penalty, if a threshold is crossed. Plus any inquiry point loss where applicable. But for a CLI, there is no new account penalty, but if there is an HP, then there could be an inquiry penalty.

Back to the scorecards. It’s called scorecard segmentation. The first segmentation point is clean/dirty. If clean, the next segmentation point is thin/thick. The next segmentation point is aged/non-aged. Last but not least is whether you have a revolver under 12 months of age. (That’s one we’ve actually figured out the threshold on.)(New account/no new account).

If it’s dirty then it’s segmented by no public record/public record. Then severity/length of time, IIRC

[Anonymous]

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@Anonymous wrote:

@AnonymousFor fico version 8 there are 12 scorecards, not 8. There are 8 clean and 4 dirty. It is well known how the scorecards are assigned. What is not well known is the threshold points that segment them, because they are proprietary.

@dragontearsis correct that the scorecards make a big difference because they do have minimum and maximums and additionally, the ingredients to the slice of the pie are weighted differently based on scorecard.

Plus here’s something you probably didn’t know, inquiries also have other effects. For instance, if you have recent inquiries, it increases the signal strength of the penalties for number of accounts with a balance. So, by having a recent inquiry you will lose more points than you otherwise would for crossing thresholds for number of accounts with a balance. Who knows what other effects it may have that we don’t know.

Probably the biggest detriment, IMHO, of inquiries is that issuers see them. Too many inquiries and many issuers will not approve you, regardless of your score, DTI, and income.

There is one thing I wanted to point out about your post 49 I think it is. It may have just been a typo, but you talked about an inquiry for a CLI and then you talked about a new account penalty. There is no new account penalty for CLI. If you apply for a new CC and your youngest CC is over 12 months of age, then you are going to receive a new account penalty in addition to any AAOA penalty, if a threshold is crossed. Plus any inquiry point loss where applicable. But for a CLI, there is no new account penalty, but if there is an HP, then there could be an inquiry penalty.

Back to the scorecards. It’s called scorecard segmentation. The first segmentation point is clean/dirty. If clean, the next segmentation point is thin/thick. The next segmentation point is aged/non-aged. Last but not least is whether you have a revolver under 12 months of age. (That’s one we’ve actually figured out the threshold on.)(New account/no new account).

If it’s dirty then it’s segmented by no public record/public record. Then severity/length of time, IIRC

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Many thanks @birdman7. One of the most useful posts I have read on this matter. 

[Anonymous]

Hey @Birdman7,

Per your post 52 in this thread, thank you:

Plus here’s something you probably didn’t know, inquiries also have other effects. For instance, if you have recent inquiries, it increases the signal strength of the penalties for number of accounts with a balance. So, by having a recent inquiry you will lose more points than you otherwise would for crossing thresholds for number of accounts with a balance.

That help to explain a few perculiar scoring matters.  Our our 15 cards, we have daily drivers, once in a while and 0 interest cards.

4 are daily drivers. The majority of our spend goes on those to optimize by category (Amazon, groceries, gas, travel, etc). We have 2 other cards that were used for larger purchases that have 0 interest terms, so we are slowly knocking those down. The recent application and use of the 0 interest cards - which adds to number of accounts with a balance - seemed to make the INQs, new account penalty and utilization much more sensitive. I now understand why.

I have 10 months until the newest card passes 1 year of age. I will report on any unusual changes to utilization and scoring.

[Anonymous]

Hey @Birdman7,

Referring again back to your post number 52 in this thread,

There is one thing I wanted to point out about your post 49 I think it is. It may have just been a typo, but you talked about an inquiry for a CLI and then you talked about a new account penalty. There is no new account penalty for CLI.

The CLI and New account matter was not a typo.

I applied for and was approved for new account, with the INQ charged to EX. So I was charged points on EX for 1) the INQ, and 2) the new account.  I am waiting for EQ and TU to recognize and then charge me points once they recognize the new account. My 3 scores are all within 15 points of one another. When I was charged points for my approved new card, the point deductions were due to a combination of INQ AND New account penalties. What I do not know is how much for each.

What I will report is that once EQ and TU report the new account, I will be charged points. I am assuming 3-5 from each bureau. Once I know that, I can infer that the cost of an INQ is by taking the total charge from EX (7 point), and subtracting the average from then other 2 bureaus. That will tell how much of the 7 points was the INQ charge, and how much was the new account charge. It is imperfect, and I may be trying to pull apart the 7 points in a manner that the bureaus do not do.

Yep, it is 7 points. Just 7 points. 7 points is not much to fret about (850-300=550/100=.1818 per FICO point). For me, it is trying to help pull apart and better understand the FICO model.

Further, my scorecard segment seems to be more sensitive to amounts owed in dollars that utilization itself. Current utilization is just under 7%, but that represents just under 20K, 12K of which is on 0 interest cards, and our spend last month was 3K higher than normal.  We are paying 13K on the cards this month, so I expect quite a reaction to my scores, in addition to determining points charged for the new accounts.

I will report what I learn.

[Anonymous]

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@Anonymous wrote:

Hey @Birdman7,

Per your post 52 in this thread, thank you:

Plus here’s something you probably didn’t know, inquiries also have other effects. For instance, if you have recent inquiries, it increases the signal strength of the penalties for number of accounts with a balance. So, by having a recent inquiry you will lose more points than you otherwise would for crossing thresholds for number of accounts with a balance.

That help to explain a few perculiar scoring matters.  Our our 15 cards, we have daily drivers, once in a while and 0 interest cards.

4 are daily drivers. The majority of our spend goes on those to optimize by category (Amazon, groceries, gas, travel, etc). We have 2 other cards that were used for larger purchases that have 0 interest terms, so we are slowly knocking those down. The recent application and use of the 0 interest cards - which adds to number of accounts with a balance - seemed to make the INQs, new account penalty and utilization much more sensitive. I now understand why.

I have 10 months until the newest card passes 1 year of age. I will report on any unusual changes to utilization and scoring.

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  @Anonymous Let me clarify. The application and use of the card(s) may or may not have played a role in making  scoring factors more sensitive.  (It depends on whether you already had a revolver under 12 months of age, see below.) However, it could not make the new account penalty greater, it could simply cause the new account penalty via scorecard reassignment. It also could only affect the sensitivity of scoring factors like utilization and inquiries if, when it was reported, it caused scorecard reassignment because you did not have another revolver under 12 months of age. 

It's therefore important to know when you had a revolver under 12 months of age on your credit report and when you did not. (For further analysis it would help if you gave me a timeline of when you got your cards over the past couple years or relevant time frame. Then rather than speaking in generalities, I can specify to your situation.)

Whenever your credit report has the presence of a revolver under 12 months of age you are in a "new account scorecard." So, if you do not have a revolver under 12 months of age and you apply for a card and the new revolver is reported on your credit report, you are reassigned from a "no new account" scorecard to a "new account" scorecard. This is from where the "new account penalty" derives.

If you already have a revolver under 12 months of age and you apply for a new revolver and it is reported, there is no "new account penalty" because you are not reassigned to another scorecard. (that doesn't mean there can't be point loss for other reasons, such as a AAOA.)

You are reassigned to the "no new account" scorecard when your youngest revolver reaches 12 months of age. That's why people see a point gain when their youngest revolver turns 12 months.

The purpose of a new account scorecard is to take into account the increased risk due to you having a new revolver. Therefore a "new account" scorecard is definitely more sensitive than a "no new account" scorecard and will cause increased sensitivity (increased signal strength) for scoring factors and most likely changes the weighting of scoring factors within each slice of the pie. So there is that.

Next, as previously explained, the presence of a recent inquiry(-ies) also increases the signal strength of some scoring factors. 

In sum, the recent application and use of the 0% cards cannot change the sensitivity of the new account penalty. It simply caused the new account penalty, IF you had no other revolvers under 12 months of age at that time. IF it caused scorecard reassignment, it can change the sensitivity or signal strength of inquiries, utilization and other scoring factors.

As a matter of fact when scorecard reassignment takes place, everything is reevaluated and ran through the new algorithm (scorecard), so what we consider to be the new account penalty includes re-weighting inquiries utilization and maybe all scoring factors. There's no way to know exactly how much it changes each.

Hope this helps. I'll address your following post in a separate post.

[Anonymous]

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@Anonymous wrote:

Hey @Birdman7,

Referring again back to your post number 52 in this thread,

There is one thing I wanted to point out about your post 49 I think it is. It may have just been a typo, but you talked about an inquiry for a CLI and then you talked about a new account penalty. There is no new account penalty for CLI.

The CLI and New account matter was not a typo.

I applied for and was approved for new account, with the INQ charged to EX. So I was charged points on EX for 1) the INQ, and 2) the new account.  I am waiting for EQ and TU to recognize and then charge me points once they recognize the new account. My 3 scores are all within 15 points of one another. When I was charged points for my approved new card, the point deductions were due to a combination of INQ AND New account penalties. What I do not know is how much for each.

What I will report is that once EQ and TU report the new account, I will be charged points. I am assuming 3-5 from each bureau. Once I know that, I can infer that the cost of an INQ is by taking the total charge from EX (7 point), and subtracting the average from then other 2 bureaus. That will tell how much of the 7 points was the INQ charge, and how much was the new account charge. It is imperfect, and I may be trying to pull apart the 7 points in a manner that the bureaus do not do.

Yep, it is 7 points. Just 7 points. 7 points is not much to fret about (850-300=550/100=.1818 per FICO point). For me, it is trying to help pull apart and better understand the FICO model.

Further, my scorecard segment seems to be more sensitive to amounts owed in dollars that utilization itself. Current utilization is just under 7%, but that represents just under 20K, 12K of which is on 0 interest cards, and our spend last month was 3K higher than normal.  We are paying 13K on the cards this month, so I expect quite a reaction to my scores, in addition to determining points charged for the new accounts.

I will report what I learn.

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@Anonymous No. You are only charged for the inquiry at the bureau where the inquiry occurred. You do not lose points at the other bureaus for an inquiry at Experian. You don't have to do any math to determine your point loss for the inquiry, at least not if you have an Experian account. The point loss for a revolver inquiry occurs when the inquiry occurs and Experian should give you an alert telling you how many points.

Let's say that inquiry cost you 7 points. If you already had a revolver under 12 months of age and were already in a new account scorecard, end of story that's what it cost you. However, if you had no revolver under 12 months of age, then when the new account reported at Experian, you experienced scorecard reassignment and the new account penalty as a result.

The new account penalty is the result of running your data through a new algorithm which weighs scoring factors  differently. So in fact the cost of the inquiry may have changed under the new scorecard. Probably did. But you'll never be able to tell how much, because you instantly go from one score to another when you're reassigned. The reassignment re-weighs all data in your CR and any changes such as AAOA and number of accounts. 

So scorecard reassignment takes into account everything in your CR. That's why people in the same no new account scorecard who both apply for a new revolver may have different new account penalties, because they may have a different number of inquiries, a different amount of utilization, a different number of accounts with a balance, etc... and all these are re-weighed differently. That's why people say it's profile dependent.

Now assume two people had identical profiles and both applied for a new card. Then they would both have the same new account penalty. However since two individuals profiles rarely match exactly, even if they both are reassigned from scorecard A to scorecard B, their new account penalty may be different due to the data and their CR being different.

Hope this sheds some light.

[Anonymous]

So, @Birdman7, thanks.

If I understand you correctly, a new INQ and or new account will/may reassign you to a new scorecard based on your behavior, and then have the scorecard specific FICO math is applied to your new data.

So the process chain is:

1. Your action (INQ and or new account) creates new data, which triggers

2. a FICO scorecard algorithm evaluates your data to determine your scorecard classification or reclassification (dirty vs clean, thick vs thin, etc), which triggers

3. the FICO scorecard classification determines your scoring ranges and sensitivity weighting, which triggers

4. FICO runs and scores your new data

Is that correct?

[Anonymous]

Yes except for the fact that an inquiry cannot cause scorecard reassignment, only a new revolver when you do not have one under 12 months of age at that time, as far as the new accounts segmentation factor goes.

[Anonymous]

Hey @birdman7, 

Given that FICO reveals mere crumbs about its algos, how certain is our body of knowledge about which actions do and do not trigger scorecard changes? What specific items do you and your fellow senior members look at that reveal or confirm a scorecard change? Is there specific clarity on where the tripwires are set, or more general guidelines?

Many people are like Winston Churchill: they love to learn, but hate being taught, more for fear of feeling foolish. I simply appreciate gathering and learning from your knowledge on these finer details.