Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO and consumer operations manager for Experian. He writes “Speaking of Credit,” a weekly reader Q&A column about credit scoring and rebuilding credit, for CreditCards.com. His writings about credit scoring have appeared on Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
I read that Capital One pulls all three credit bureaus when you apply for a card; should I avoid that card issuer to prevent hurting my score?
Capital One does pull credit reports from the three big credit bureaus before approving a credit card application. However, each bureau calculates your score independently. This means the effect of each hard inquiry will be minimal and only reflected on the score from that particular bureau.
Dear Speaking of Credit,
I read recently in a Million Mile Secrets story that says some folks avoid Capital One cards because they pull three main credit bureaus when they process your application.
Is that true? If so, does that mean that the credit ding from applying for a Capital One card or loan would lower my credit score more than it does when I apply for cards through other issuers? Thanks! – Jeff
It’s true. I was able to confirm with Capital One that it does indeed pull credit scores from all three big credit bureaus – Equifax, Experian and TransUnion – before approving a credit card application.
What makes this rather extensive credit checking process unusual is that card companies traditionally rely on just a single bureau’s information when making a card-issuing decision.
Why does the number of bureau pulls matter? As you’ve pointed out, scores can be impacted by whether the bank pulls one, two or three inquiry-generating credit inquiries for the same applicant.
Thus it is the savvy consumer in you that questions whether pulling three scores for a credit card application is a good idea.
Each credit bureau calculates your credit score independently
First, it helps to be aware that each credit bureau not only produces its own version of your credit report, but also calculates your FICO score based solely on its own credit information that tends to vary somewhat from bureau to bureau.
Such differences in data, of course, can then lead to different credit scores at different bureaus for the same person.
While much of the same information, such as card and loan accounts, collections and public records, appears similarly across the three bureaus, the inquiries that result from credit card application pulls are a different animal entirely.
Unlike most credit bureau information that is likely to appear across all three credit reports and scores, only inquiries made to a particular credit bureau will appear in that bureau’s report and score.
How are scores impacted by three pulls from the same card application?
Knowing a Capital One application will lead to a new inquiry at each bureau – which won’t result in three new inquiries at a single bureau, by the way – can lead us to wonder what each of those additional inquiries is likely to mean for each of your scores.
FICO, the score’s creator, tells us an additional hard inquiry typically leads to about a 5-point-or-less score drop over a one-year period.
Therefore, with a single bureau pull, expect to lose about 5 points or less at a single bureau. With a three-bureau pull, simply expect to lose about 5 points or less at all three bureaus.
How common is a hard inquiry on all three bureaus?
While Capital One’s three-bureau pulls may be a bit unusual for card issuers, it has been the standard practice among mortgage lenders for decades.
And yet, while credit card and mortgage inquiries tend to have similar impacts on scores when counted, the number of inquiries considered at all over a short period can depend on whether they originate from credit card or mortgage applications.
Here are two examples:
- Multiple mortgage inquiries arising within a focused period of time – 14-45 days, depending on the scoring model used – are reduced to a single inquiry in the eyes of the score. Additionally, no mortgage inquiries have any impact on your score during the first 30 days following the pull, no matter how many there are.
- For multiple credit card inquiries incurred over the past year, however, no such inquiry “deduplication” is offered by the scoring formula. That means each card inquiry can potentially affect your scores to some degree. Though again, not usually by more than a few points.
Tip: Spacing out your credit card applications can help reduce the effect of hard inquiries on your score. If you want to apply for multiple cards during the same year, consider, for example, applying for a card every quarter rather than four cards at once,
Should you steer clear of card issuers that pull all three bureaus?
Despite pulling more scores for a single application than most other banks, the only score difference you’re likely to see with Capital One is that instead of being left with a slightly lower score at just one bureau, you could also see that small score loss on your other two scores as well. But again, only for a maximum of one year.
Putting this all in perspective, picking a card that best meets your needs, regardless of how many bureaus they access, is likely to provide scoring and other kinds of benefits for many years that will far outweigh any such short-term dings to your scores.
Bottom line: Choose the right card for you. Don’t worry about the inquiries. Good luck!