How multiple loan inquiries can impact new card approval

Your loan inquiries won’t hurt much, but wait until your credit score hits 700

Keeping Score with Steve Bucci

Steve Bucci has been helping people decode and master personal finance issues for more than 20 years. He is the author of “Credit Management Kit For Dummies,” “Credit Repair Kit For Dummies,” “Barnes and Noble Debt Management,” co-author of “Managing Your Money All-In-One For Dummies” and “Debt Repair Kit For Dummies” (Australia). Steve is an experienced expert witness in identity theft, credit scoring and debt related cases. He has been a presenter at the FICO InterACT Global Conference, the Federal Reserve and the International Credit Symposium at Cambridge University in the UK.

Ask Steve a question, or see if your question has already been answered in the Keeping Score answer archive.

Should I wait to apply for a new rewards credit card after several loan inquiries? 

Multiple auto, mortgage or student loan inquiries are typically counted as a single inquiry if they occur within a 45-day period, and they're ignored if they occurred within the past 30 days. But if your score is still below 700, you may not qualify for a credit card with generous rewards.

Expert Q&A

Check out all the answers from our credit card experts.

Dear Keeping Score,

I have a credit score of 687, which came down from 757 once I paid off two loans early and purchased a car. I have a credit card with a $500 limit and use it for gas and emergencies. I owe $187 on it, which I'm paying tomorrow. I'm interested in getting another credit card thAT offers better rewards and discounts for my car. But when I was buying my car, my credit was run four times. Would it be smart to apply for a new card, wait or do nothing and just stick with what I have? Credit history has been the main thing hurting me, it seems. -Randall

Dear Randall,

My advice for you right now is to wait. I understand your desire to get a better card with rewards and discounts. I am a big believer in credit card rewards myself. However, you have seen your credit score go down 70 points, and I’m not even sure you would qualify for that better card at this point.

Let’s talk first about your concern that your credit was run four times when you were buying your car. Although hard credit inquiries are one of the criteria used in credit scoring, in the case of car purchases (and mortgages and student loans), the general practice is to score multiple inquiries within a 45-day period as a single inquiry. Additionally, FICO will ignore any rate-shopping loan inquiries within the past 30 days.

This allows you to shop around without having the inquiries lower your score. The credit bureaus and FICO know it’s smart to shop around for the best deal when making a large purchase, such as a car. However, it is true that you did take a ding when you financed your car.

See related: How the credit score formula handles multiple inquiries

For most people, a credit inquiry will take less than 5 points off their FICO scores. For perspective, the full range for FICO scores is 300-850. However, if you have a thin credit history, and the inquiries didn't fall within that 45-day window, they may have a greater impact. The reasoning behind this is that the larger the number of inquiries, the greater the risk. According to FICO statistics, people with six recent inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. 

Tip

Tip: If a card issuer pulls your credit report from all three bureaus when you apply for a new card, your score from each bureau will reflect only one hard inquiry. 

Your use of a $500 limit credit card for emergencies worries me a bit. First, using credit for emergencies leaves you more vulnerable to an additional emergency. (They tend to come in threes!) Second, $500 is not nearly enough. I recommend having at least six and preferably 12 months of expenses set aside for emergencies. And third, this emergency fund needs to be in readily available cash, not a line of credit. So, my suggestion is to start saving for those inevitable emergencies as soon as you can.

Another thing to remember is that if you apply for that new credit card today, there is a chance you could be turned down. Then, all you have to show for it will be that hard credit inquiry, and likely another dip in your score. Ouch!

So, for now, I suggest you wait and watch. Let your score bounce back to at least 700 or 720. This should happen just by having paid off the loans and letting your new car purchase age a little. This will take a few months, but if you are diligent about paying off the card you have now each month and making those car payments – and any other payments you have – on time, every time, you will see your score climb back up. 

I also suggest you check your score on a monthly basis so you’ll be able to gauge your progress. While you’re at it, be sure to review your credit reports just to make sure that no erroneous data finds its way on to your file. You can check both for free at Bankrate.com. You're also entitled by law to one free credit report from each of the three major credit bureaus per year, and you can get them at AnnualCreditReport.com.  

When your score gets back to where you want it, check CreditCards.com for the best rewards cards out there. And don’t close out that $500 card you have now, unless it charges a burdensome fee. Continue to use it some, even after you get that fancy new rewards card, because that credit history is gold for your credit score as well.

Remember to keep track of your score!


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Updated: 09-26-2018