Credit Inquiries
To learn about credit inquiries and how they may or may not affect your Fair Isaac insurance score, choose a topic below or scroll down the page.
- What is a credit inquiry?
- Which inquiries affect my insurance score?
- Does checking my credit affect my score?
- How are inquiries factored into Fair Isaac insurance scores?
- Do inquiries always affect my score?
- What happens when I apply for credit?
- Will my Fair Isaac insurance score drop if I apply for new credit?
- What should I know about “rate shopping?”
- How can I improve my insurance score?
What is a credit inquiry?
A credit inquiry is an item on a credit report that shows a business with a "permissible purpose" (as defined under the federal Fair Credit Reporting Act) has previously requested a copy of the report.
Which inquiries affect my insurance score?
When you check your credit report, you may notice that a number of credit inquiries have been made, sometimes from businesses that you don't know. But the only inquiries that count toward your Fair Isaac insurance score are the ones that result from your applications for new credit.
- Inquiries that count toward your Fair Isaac insurance score.
There is only one type of credit inquiry that counts toward your insurance score. When you apply for a mortgage, auto loan or other credit, you authorize the lender to request a copy of your credit report. These types of inquiries, prompted by your own actions, appear on your credit report and are factored into your Fair Isaac insurance score. - Inquiries that don’t count toward your Fair Isaac insurance score.
Your own credit report requests, credit checks made by businesses to offer you goods or services, credit checks made by insurance companies, or inquiries made by businesses with whom you already have a credit account do not count toward your Fair Isaac insurance score. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your Fair Isaac insurance score.
Does checking my credit affect my score?
Your Fair Isaac insurance score is not affected by your own credit report checks
Checking your credit reports regularly to be sure they are complete and error-free is a good idea. In fact, maintaining accurate credit reports is a part of good credit management, which can help to improve your insurance scores over time.
You can order all three of your credit reports (with FICO® credit risk scores) at www.myfico.com. You can also order your credit reports from the credit bureaus. Either way, your Fair Isaac insurance score is not affected by your own credit report checks — which are voluntary.
How are inquiries factored into Fair Isaac Insurance scores?
There are five types of information used to calculate a Fair Isaac insurance score at any given point in time. Each type of information counts as a percentage of a total insurance score:
| Payment History | = 40% |
| Amounts Owed | = 30% |
| Length of Credit History | = 15% |
| New Credit | = 10% |
| Types of Credit Used | = 5% |
These percentages are based on the importance of the five categories for the general population. For particular groups, such as people with relatively short credit histories, the importance of the categories may differ.
Inquiries are a subset of the “new credit” category shown above, which accounts for 10% of the total Fair Isaac insurance score. Their importance depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. What’s important is the mix of information, which varies from person to person, and for any one person over time.
Do inquiries always affect my score?
A Fair Isaac insurance score takes into account only voluntary inquiries that result from your application for credit. The information about inquiries that can be factored into your Fair Isaac insurance 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.
A Fair Isaac insurance score does not take into account any involuntary inquiries made by businesses with which you did not apply for credit, inquiries from employers, or your own requests to see your credit report.
For many people, one additional credit inquiry (voluntary and initiated by an application for credit) may not affect their Fair Isaac insurance score at all. For others, one additional inquiry could take less than 5 points off their score.
Inquiries can have a greater impact, however, if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk: for example, people with six inquiries or more on their credit reports have loss ratios-the amount paid by the insurance company in claims divided by the amount they collected in premiums-more than two times the loss ratios of people with no inquiries on their reports.
What happens when I apply for credit?
When you apply for credit, you authorize the lender to ask for a copy of your credit report. This is how voluntary inquiries appear on your credit report.
The inquiries section of your credit report contains a list of everyone who accessed your credit report within the last two years. The report you see lists both voluntary inquiries, spurred by your own requests for credit, and involuntary inquiries, such as when lenders order your credit report to offer you a pre-approved credit card.
Will my Fair Isaac insurance score drop if I apply for new credit?
If it does, it probably won’t drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher insurance risk, but most insurance scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the score.
What should I know about “rate shopping?”
Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you’re only looking for one loan. To compensate for this, the insurance score counts multiple inquiries in any 30-day period as just one inquiry. In addition, the score ignores all inquiries made in the 30 days prior to scoring.
How can I improve my insurance score?
If you need a loan, do your rate shopping within a focused period of time, such as 30 days. Fair Isaac insurance scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
Generally, people with high Fair Isaac insurance scores consistently:
- Pay bills on time
- Keep balances low on credit cards and other revolving credit products
- Apply for and open new credit accounts only as needed
Also, here are some good credit management practices that can help to raise your Fair Isaac insurance score over time:
- Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them on time will raise your Fair Isaac insurance score over the long term.
- Check your own credit reports regularly, and before applying for new credit, to be sure they are accurate and up-to-date. As long as you order your credit reports directly from the credit bureaus, or through an organization authorized to provide credit reports to consumers, such as myFICO®, your own inquiries will not affect your Fair Isaac insurance score.
