September 30, 2019
Clients often ask Orion’s Account Executives about the impact of creditors pulling their client’s credit. The answer begins with clarification that there are two types of credit inquiries, hard pulls and soft pulls, and our AEs make sure our clients know the difference between them. And regardless of what is happening in the political arena, which is a lot, the basics of credit remain the same.
Soft inquiries are defined as inquiries where your client’s credit is NOT being reviewed by Orion. Inquiries where your client is checking their own credit, (a great resource to utilize for credit information is MyFico.com), inquiries from employers, involuntary credit checks made by businesses to offer you goods or services (such as promotional offers by credit card companies), or inquiries made by businesses with whom your client already has a credit account are all considered soft pulls and DO NOT affect FICO scores.
Hard inquiries are credit inquiries where a potential lender IS reviewing your client’s credit because they've applied for credit with them. Hard inquiries DO AFFECT your client’s credit score. These include credit checks when your client has applied for an auto loan, mortgage, or credit card.
One exception occurs when they are "rate shopping", which is a good idea. All inquiries within a 45-day period for a mortgage, auto loan, student loan or search for a rental property such as an apartment is considered a single credit inquiry. These inquiries are usually recorded by the credit bureau as a type of real estate-related inquiry, so the FICO Score will treat them the same way. Renters can avoid lowering their FICO Score by doing apartment hunting within a short period.
Other inquiries that can be factored into one’s credit (like FICO) score includes number of recently opened accounts and proportion of accounts that are recently opened by type of account. Number of recent credit inquiries. Time since recent account opening(s) by type of account. Time since credit inquiry(ies). Each of these types of credit checks count as a single credit inquiry.
Orion’s AEs remind our clients that for many people, one additional credit inquiry (voluntary and initiated by an application for credit) may not affect their FICO score. For others, one additional credit inquiry would take less than 5 points off their FICO score. Just tell your client not to do it every day for weeks!