A credit inquiry is the line on your credit report that shows who checked your credit and when. There are two kinds. A hard inquiry happens when you apply for credit, such as a mortgage, car loan or new card, and it can trim a score by a few points. A soft inquiry happens when you check your own credit, when a company sends you a prescreened offer, or when a lender runs a soft-pull pre-qualification, and it has no effect on your score.
What an inquiry does to your score
FICO says one more hard inquiry costs most people less than five points. Inquiries stay on the report for up to 24 months, and FICO scores count them for the first 12.
Mortgage shopping gets special handling. The CFPB says multiple mortgage credit checks within a 45-day window count as a single inquiry on newer scores, and older FICO versions group them within 14 days. FICO scores also ignore mortgage inquiries less than 30 days old. The mortgage shopping question goes through those windows in detail.
Why underwriters care about recent inquiries
Underwriters worry less about the points than about a new debt the inquiry may have opened, one that hasn't reached your report yet. A car loan signed last month may not show up for another billing cycle, but its payment still belongs in your debt-to-income ratio (DTI), the house payment plus monthly debts divided by gross monthly income.
USDA's handbook has lenders investigate every inquiry from the 90 days before the credit report to find out whether new accounts were opened. FHA, VA and Conventional lenders ask the same question in practice, usually with a short signed letter of explanation. Lenders also recheck credit before closing, so a new account opened mid-process comes to light either way.
A worked example: an inquiry that became a car payment
Chris earns $5,200 a month gross with $300 in card and loan payments. On FHA with an automated approval, total debts can reach 56.9% of income, or $2,958.80, and the house payment alone can reach 46.9%, or $2,438.80.
| Before the car | After a $425 car payment | |
|---|---|---|
| Monthly debts | $300 | $725 |
| Room under the 56.9% total limit | $2,658.80 | $2,233.80 |
| Room under the 46.9% housing limit | $2,438.80 | $2,438.80 |
| Most house payment allowed | $2,438.80 | $2,233.80 |
The inquiry itself cost Chris a few points. The car payment it led to cost $205 a month of house payment ($2,438.80 minus $2,233.80). At a 5.75% rate, $205 a month of principal and interest carries about $35,000 of loan.
Keeping inquiries from costing you
- Do your mortgage shopping inside one 14-day stretch so every model groups the pulls.
- Put off car, furniture and card applications until after closing.
- When the lender asks about an inquiry, answer in writing and say whether it opened an account.
- Dispute any inquiry you don't recognize with the credit bureau that lists it.
AAA Capital Funding pulls your credit once and prices the loan with several wholesale lenders off that one report. Check your buying power first in the affordability calculator, then call AAA Capital Funding at 888-601-8344 before applying for anything else on credit.