Inquiry lab rat, checking in with a personal story. Some may find the chart below to be useful to explain the impact to your credit score from inquiries (INQs) and new accounts.
The 'new credit' category for credit score has 2 main parts: inquiries and new accounts. The weighting and sensitivity of each depends on a number of factors, including your scorecard assignment (search on that term is it is new to you; scorecards are very important to your score).
The data below is from my credit report and score. The data are all from Experian (EX), taken directly from their credit score tool and credit reports.
Date columns should read: 11/2017 11/2018
Background to explain this chart:
11/2017 column
In the fall of 2017, I became a little more knowledgable and a lot more confident about my credit, largely due to this forum with help from several other. That increased confidence (combined with my slight knowledge increase in credit scoring) led me to go shopping....I went on an app spree.
In September 2017, my EX score was 700. Not great, but not terrible. Between mid September and mid October 2017, I applied and was approved for 5 cards, which added 75K in CL. I had 3 prior scoreable INQs on my credit report. I also had an account listed as a chargeoff on my credit report. It was an error. I knew it and searched hard for ways to prove it.
Following my app spree, my score dropped from 700 to 680.
I had been battling for over 2 years with the collection company and the original organization to have the reported chargeoff removed. I finally uncovered a documented record that proved it was an error. I searched these boards for how to approach the matter. Once I had a solid plan, I went back to the collection agency and indicated that I had direct evidence. They connected me with the original organization. By January 2018, we worked out the retraction of their claim with the collection agency, and they promptly removed the error. My score jumped 100 points.
11/2018 column
I remained in the garden during all of 2018. No new applications. No new accounts. Every bill was paid in full and on time. Utilization remained below 10%.
I did not then have the level of knowledge that I do have now about the inner workings of credit reports and credit scores, but I knew my score would be better. The 100 point bump, in combination with my new insights, changed my psyche about checking my score . I used to check it with a grumble. By early 2018, I began checking my score with a smile. My 680 had risen to a 780, and I hoped that it would increase more as September, October and November approached.
I anxiously awaited the 1 year mark for both INQs to fall off and accounts to achieve their 12 months / 1 year of age. In early October my score went up 5 points. Then in late October, 7 more points. By mid November, all of my accounts were now out of the 'new' category, and all INQs became unscoreable. My score cracked through 800, and kept on rising. The total increase was of INQs becoming unscoreable and all accounts reporting paid as agreed, my score had increases 35 points to 815. Sweet!
What I learned
Reflecting back on the journey from 2017 to now, I realized my knowledge related to credit and credit score improved. A lot. My understanding and management of my credit has increased from the level of a kindergartener (I did not know what I did not know) to that of a grad school student (I know what I know, I know that I do not know it all, and I have the desire to continue to learn more).
Some of the points that I learned along the way:
- No. More. App. Sprees. The immediate complications and consequences are not worth the momentary thrill of being approved.
- Apping is not a sport. Pick well. Apply only after you have given careful thought to which cards you REALLY want and need.
- INQs are scratches. New accounts are cuts. Together, they represent a credit iceberg - there are hidden effects that do damage which are less obvious. New accounts have multiple consequences to your credit file: scorecard change, age of youngest account, average age of accounts, additional spend and use requirements. Additional new credit implications:
- More credit MAY lead you to spend more that you should. Avoid complicating your life if you cannot control your spending.
- New accounts mean more matters that require attention: more payments, more payment dates, utilization considerations, etc.
- More passwords (data security guy here: 1 ACCOUNT, 1 PASSWORDS; SUPER HARD PASSWORD IF YOU STORE CARDS IN YOUR PHONE)
- Which cards go in your wallet vs sock drawer; if you are thinking about sock drawer when you app, do you really need to app?
- Read a lot and think a lot before you do a lot. Unwinding bad decisions is a long and hard path. As in golf, surgery and love, it is best to avoid mistakes.
Credit is wonderful tool. Without knowledge and discipline, credit is also a dangerous tool. There are very wise folks who willingly contribute their knowledge and experience here for free. Listen and learn, and you will love your credit life.