Will my credit score fall if I shop many loan providers

Credit inquiries impact credit scores negatively because statistical studies show that multiple inquiries are associated with high risk of default. Distressed borrowers often contact many lenders hoping to find one who will approve them. On the other hand, multi-

Best

Worst

4 cards

15 cards

no delinquencies in past two years

many delinquencies in past two years

balance below 75% of line on all cards

many cards are maxed out

no cards acquired in last two years

three new cards acquired in last month

Table 2-1. Best and worst of credit card usage

Table 2-1. Best and worst of credit card usage ple inquiries can also result from applicants shopping for the best deal.

To avoid catching shoppers in his net, the genie who scores credit ignores inquiries that occur within 30 days of a score date. Suppose, for example, I shop a lender on May 30 and the lender has my credit scored that day. Even if I had shopped 50 other lenders in May and they had all checked my credit, none of those inquiries would affect my credit score on May 30.

Inquiries from April and back 11 months would, however, be counted on May 30. To avoid biasing the credit score from earlier shopping episodes, the scorers treat all inquiries that occur within any 14-day period as a single inquiry. If you shopped 50 lenders during April 1-14, they would count as one inquiry. If you spread them over April 1-28, they would count as two inquiries.

You will damage your credit if you spread your shopping over many months. But, because the market can change from day to day, it makes little sense to do this in any case.

Circumstances can cause a consumer to shop, drop out of the market, and return later when conditions are more favorable. You minimize the adverse effect by concentrating each shopping episode within 14 days or less.

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