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  • 50+ point average credit score increase in the first 90 days
  • Remove negative items affecting your credit score
  • Lower interest rates
  • Lower payments


At Senate Group’s frequently asked questions you will find lot of information and answers to most asked questions about credit scores, credit cards, mortgages and new credit.

Credit Scores

In general, FICO® scores do not change that much over time. But it’s important to note that your FICO score is calculated each time it’s requested; either by you or a lender. And each time it’s calculated it’s taking into consideration the information that is on your credit report at that time. So, as the information on your credit report changes, your FICO score can also change.

How much your FICO score changes from time to time is driven by a variety of factors such as:

  • Your current credit profile – how you have managed your credit to date will affect how a particular action may impact your score. For example, new information on your credit report, such as opening a new credit account, is more likely to have a larger impact for someone with a limited credit history as compared to someone with a very full credit history.
  • The change being reported – the “degree” of change being reported will have an impact. For example, if someone who usually pays bills on-time continues to do so (a positive action) then there will likely be only a small impact on their score one month later. On the other hand, if this same person files for bankruptcy or misses a payment, then there will most likely be a substantial impact on their score one month later.
  • How quickly information is updated – there is sometimes a lag between when you perform an action (like paying off your credit card balance in full) and when it is reported by the creditor to the credit bureau. It’s only when the credit bureau has the updated information that it will have an effect on your FICO score.

Keep in mind:
Small changes in your score can be important if you’re looking to obtain a certain FICO score level or if you are striving to reach a certain lender’s FICO score “cutoff” (the point above which a lender would accept a new application for credit, but below which, the credit application would be denied).

In order to receive a valid FICO® Score, the credit report must have:

  • At least one account opened for six months or more, and
  • At least one account that has been reported to the credit bureau within the past six months, and
  • No indication of deceased on the credit report (Please note, if you share an account with another person this may affect you if the other account holder is reported deceased).

The minimum scoring criteria may be satisfied by a single account or by multiple accounts on a credit file. In certain rare cases, whether a given credit report qualifies for a FICO® Score may vary across different FICO® Score versions.

Not all credit scores are FICO Scores. For over 25 years, FICO Scores have been the industry standard for determining a person’s credit risk. Today, more than 90% of top lenders use FICO Scores to make faster, fairer, and more accurate lending decisions. Other credit scores can be very different from FICO Scores—sometimes by as much as 100 points!

What’s in a name? When it comes to FICO Scores versus other credit scores, the answer is “quite a lot.”

FICO Scores are used by 90% of top lenders to make decisions about credit approvals, terms, and interest rates. Chances are when you apply for a mortgage, an auto loan, credit card, or a new line of credit, the bank or lender is looking at your FICO Score.

The reason? Lenders know what they are getting when they review a FICO Score. FICO Scores are trusted to be a fair and reliable measure of whether a person will pay back their loan on time. By consistently using FICO Scores, lenders take on less risk, and you get faster and fairer access to the credit you need and can manage.

FICO Scores use unique algorithms to calculate your credit risk based on the information contained in your credit reports. While many other companies design their credit scores to look like a FICO Score, the mathematical formulas they use can vary greatly.

Unfortunately, the methods used by these other companies can lead to credit scores that are very different from your FICO Score. And even just a few points difference can have significant consequences on your terms and rates—potentially costing you hundreds or even thousands of dollars.

Why do FICO Scores matter?

Imagine a world where every lender used a completely different method to decide whether or not to give you a loan. You would have no way of knowing whether you would be approved at one place and denied at another.

This was actually the case not that long ago. There were all kinds of different ways that lenders would make decisions about extending credit (including data about a person’s address, type of employment, and gender, among other things.). People were often approved or denied based on inconsistent and sometimes unfair information.

In 1989, FICO Scores were created as a way to help streamline the decision-making process for lenders and make the lending process more consistent and fairer for people like you.

So why choose FICO Scores over other scores? Here are just a few reasons:

  1. You can be confident you’re seeing a score many lenders actually use. Because FICO Scores are the most widely used scores, it is very likely the lender will check your FICO Scores when you apply for credit.

  2. You can make more informed financial decisions. With FICO Scores, you’re better prepared to know when to apply for credit because you’re viewing the scores used by 90% of the top lenders.

Remember, non-FICO credit scores can differ by as much as 100 points. Other credit scores may vary from your FICO Score by several points. This variance could cause you to overestimate your likelihood of getting approved. According to a recent Consumers Union report, “score discrepancies can give consumers the false hope that they qualify for credit or low-interest rates when they do not. Consumers can face higher interest rates than expected, or be denied credit.”2

On the flip side, non-FICO credit scores can lead you to underestimate your creditworthiness, keeping you from purchasing a much-needed family car or refinancing a mortgage that could save you thousands in interest.

  1. You get 25+ years of experience and a score that evolves to meet your needs. The way we use credit has changed a lot since the first FICO Score. For example, today, we use credit cards more frequently and loans are larger to accommodate rising costs.

As spending behaviors have changed, FICO Scores have evolved. For instance, FICO Scores continue to accurately predict credit risk so you can get access to the credit you need and get credit that you can manage. By choosing FICO Scores, you’re getting decades of industry-leading knowledge and expertise that lenders value and trust.

Married couples don’t have a joint FICO® score, they each have individual scores. The difference is that when you are single you usually only need to worry about your credit habits and profile. However, when you become married your spouse’s credit habits and profile have an impact on yours. For example, if you have a credit card in both of your names and it doesn’t get paid on time, that can affect both of your FICO scores – and not in a good way.

In the U.S., there are three national credit bureaus (Equifax, Experian and TransUnion) that compete to capture, update and store credit histories on most U.S. consumers. While most of the information collected on consumers by the three credit bureaus is similar, there are differences. For example, one credit bureau may have unique information captured on a consumer that is not being captured by the other two, or the same data element may be stored or displayed differently by the credit bureaus.

A predictive FICO scoring system resides at each of these credit bureaus from which lenders request a FICO® Score when evaluating a particular consumer’s credit risk. The FICO scoring system design is similar across the credit bureaus so that consumers with high FICO Scores on bureau “A’s” data will likely see a similarly high FICO Score at the other two bureaus. Conversely, consumers with lower FICO scores at bureau “A” will likely get low FICO Scores at the other two bureaus when the underlying data is the same across the bureaus.

When the scores are significantly different across bureaus, it is likely the underlying data in the credit bureaus is different and thus driving that observed score difference. However, there can be score differences even when the underlying data is identical as each of the bureaus FICO scoring system was designed to optimize the predictive value of their unique data.

Keep in mind the following points when comparing scores across bureaus:

  • Not all credit scores are “FICO” scores. So, make sure the credit scores you are comparing are actual FICO Scores.

  • The FICO scores should be accessed at the same time. The passage of time can result in score differences due to model characteristics that have a time based component. Comparing a FICO score pulled on bureau “A” from last week to a score pulled on bureau “B” today can be problematic as the “week-old score” may already be “dated”.

  • All of your credit information may not be reported to all three credit bureaus. The information on your credit report is supplied by lenders, collection agencies and court records. Don’t assume that each credit bureau has the same information pertaining to your credit history.

  • You may have applied for credit under different names (for example, Robert Jones versus Bob Jones) or a maiden name, which may cause fragmented or incomplete files at the credit reporting agencies. While, in most cases, the credit bureaus combine all files accurately under the same person, there are many instances where incomplete files or inaccurate data (social security numbers, addresses, etc.) cause one person’s credit information to appear on someone else’s credit report.

  • Lenders report credit information to the credit bureaus at different times, often resulting in one agency having more up-to-date information than another.

  • The credit bureaus may record, display or store the same information in different ways.

A bankruptcy will always be considered a very negative event by your FICO® score. How much of an impact it will have on your score will depend on your entire credit profile. For example, someone that had spotless credit and a very high FICO score could expect a huge drop in their score. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their score. Another thing to note is that the more accounts included in the bankruptcy filing, the more of an impact on your score.

A bankruptcy is considered a very negative event by your FICO® score regardless of the type. As long as the bankruptcy is listed on your credit report, it will be factored into your score. However, as time passes, the negative impact of the bankruptcy will lessen. Typically, here is how long you can expect bankruptcies to remain on your credit report (from the date filed):

  • Chapter 11 and 7 bankruptcies up to 10 years.

  • Completed Chapter 13 bankruptcies up to 7 years.

Keep in mind that these dates refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit report after 7 years.

Your FICO® score considers late payment using these general criteria; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur. So this means that a recent late payment, could be more damaging to your FICO score than a number of late payments that happened a long time ago.

You may have noticed on your credit report that late payments are listed by how late the payments are. Typically, creditors report late payments in one of these categories: 30-days late, 60-days late, 90-days late, 120-days late, 150-days late, or charge off (written off as a loss because of severe delinquency). Of course, a 90-day late is worse than a 30-day late, but the important thing to understand is that you can recover from a late payment prior to charge-off by getting and staying current with your payments. If however, you continue not to pay your debt and your creditor either charge it off or sends it to a collection agency, it is considered a significant event with regard to your score and will likely have a severe negative impact.

It’s important to always stay on top of all of your bills; your history of payments is the largest factor in your FICO score. There may be circumstances that cause you to be unable to keep current with your bills – maybe an unexpected medical emergency or losing your job. Before being late for any payment, we recommend that you reach out to your creditor; the creditor may be willing to work something out with you that you both can live with. If your creditors won’t work with you, try to avoid having your account going so delinquent that the creditor sells your account to a collection agency. Again, late payments hurt, but you can get current with them by paying them off – you can never again get that account current once it is turned over to a collection agency.

A bankruptcy is going to be factored into your FICO® score until it falls off of your credit report. While it may take up to ten years for a bankruptcy to fall off of your report, the impact of the bankruptcy will lessen over time.

If you plan to file a bankruptcy, here are some things you should do to make sure your creditors are accurately reporting the bankruptcy filing:

  • Check your credit report to ensure that accounts that were not part of the bankruptcy filing are not being reported with a bankruptcy status.
  • Make sure your bankruptcy is removed as soon as it is eligible to be “purged” from your credit report.

After a bankruptcy has been filed, the sooner you begin retaining or re-establishing credit in good standing, the sooner you can expect your FICO score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time. As time passes and the impact of the bankruptcy lessens, you might apply for a traditional credit card and also continually make all of your payments on time.

If you are new to credit and are trying to build a credit history, here are a few ways you can get started.

  • Apply for, and open one new credit card. Because you have little or no credit history, you may not get very good terms on this credit card – such as a high APR. However, if you charge small amounts and pay off the balance each month, you won’t be paying interest each month so the high APR won’t affect your bottom line.

  • Open a secured credit card. If you are unable to get approved for a traditional credit card, a secured credit card can help you build your credit history. This type of card requires you to deposit money with the credit card company. You can then make charges on the secured card up to the amount you have deposited.

Whether you obtain a traditional credit card or a secured credit card, it is important to keep low balances and pay off your balance each month and never miss a payment. This will help build a positive credit history.

While putting more money towards savings is usually a good idea, it’s not necessarily going to improve your FICO® score. Your FICO score does not consider the amount of disposable cash you have at any given time. Therefore, the amount of money you keep in savings doesn’t impact your FICO score.

As far as spending less, that could have an affect on your FICO score. If you typically use your credit cards for purchases and you don’t always pay off the balance on those credit cards, then you may notice an improvement in your score by curbing your spending habits. Your FICO score factors in the balance on your revolving credit accounts (for example, credit cards). It’s a good idea to keep the balances on your credit cards low and pay them off each month. By limiting your spending, you may accomplish both!

Credit Cards

Yes, anyone can build a good credit rating by using a charge card. First let’s clarify what we mean by charge card. Many people use the terms credit card and charge card interchangeably, but there are important differences.

Credit card

In general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow you to carry a balance from one billing cycle to the next. However, you will usually have to pay interest on that balance. You likely also have to pay at least a certain amount of your balance each time you receive a bill.

Charge card

A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing cycle to the next. American Express and Diner’s Club are two well-known organizations that offer charge cards.

So what does this mean for your FICO® score? There are many ways to build one’s FICO score over time. Credit cards in general have a strong influence on the FICO score calculation. Charge cards can be just as effective as any other credit product in helping consumers establish a credit history.

Whether you have a credit card or a charge card, the most important factor in building or improving your FICO score is using credit responsibly. That means paying your bills on time and using your credit only when needed. If you can do those things consistently, you should be well on your way toward maintaining a good score.

The short answer is no. We never recommend closing a credit card for the sole purpose of raising your FICO® score.

This may sound a bit counter-intuitive; after all, cleaning up your credit profile by getting rid of old or unused credit cards sounds like a good idea – and it may be from an overall credit management perspective. If you are tempted to charge more than you should just because you have more availability to credit, then getting rid of that temptation by closing some credit cards might be your best course of action.

However, your FICO score takes into consideration something called a Credit Utilization Ratio. This ratio basically looks at your total used credit in relation to your total available credit; the higher this ratio is, the more it can negatively affect your FICO score. So, by closing an old or unused card, you are essentially wiping away some of your available credit and there by increasing your credit utilization ratio.

It’s a bit tricky, so here’s an example:

Say you have 3 credit cards. Credit card A has a $500 balance and a $2000 credit limit. Credit card B is an unused card with a zero balance and a $3000 limit. Credit card C has a $1,500 balance and a $1,500 limit:

Card | Balance | Limit
:–: | –: | –:
A | $500 | $2,000
B | $0 | $3,000
C | $1,500 | $1,500

In this scenario your Credit Utilization Ratio looks like this:

Card | Balance | Limit | Utilization Ratio (balance ÷ limit)
:–: | –: | –: | :–:
A | $500 | $2,000 | 25%
B | $0 | $3,000 | 0%
C | $1,500 | $1,500 | 100%
Total | $2,000 | $6,500 | 30%

Now, if you decide to close credit card B because it’s an old card that you never use, this is how your credit utilization ratio would look like:

Card | Balance | Limit | Utilization Ratio (balance ÷ limit)
:–: | –: | –: | :–:
A | $500 | $2,000 | 25%
C | $1,500 | $1,500 | 100%
Total | $2,000 | $3,500 | 57%

See that your Credit Utilization Ratio rose from 30% to 57% by closing the unused credit card?

Often the APRs that your credit cards are charging you are based on your FICO® score. However, even if you have a good FICO score you need to read the fine print of your credit card agreement. Your credit card company won’t lower your APR just because you’ve been taking care of your credit; you need to call them and ask them to lower your APR!

A good course of action is to know your FICO score and have that handy when you call your credit card company. Do a bit of research by finding out common rates based on your FICO score. You can go to the FICO Forums and ask other consumers what APR you should expect based on your credit profile – you may be surprised to see how many people are willing to provide insight and help.

After you do some research, you should know what is a fair APR based on your FICO score. If your credit card company is unwilling to work with you, then you should consider transferring your balance to a credit card with more attractive rates. When transferring a balance, some things to look for are the introductory period and the standard APR.

Introductory Rate: the APR a credit card will charge you for a specified period of time. After the introductory period ends, your introductory APR will convert to a standard APR.

Standard Rate: the APR a credit card will charge you once the introductory period expires.

Things to keep in mind here:
If you cannot pay off the balance of transfer during the introductory period, then look for a card that also has a relatively low standard APR. Since you’ll be carrying a balance after the introductory period is over, your finance charges can add up quickly if your standard APR is high.

There are a number of different things to consider when managing credit card debt. We’ll touch on a few of the key things to be aware of.

Avoid a single credit card

If you only have one credit card available and your coming close to maxing out that card, you might consider applying for another card. Having only a single credit card can be risky. If an emergency like an unexpected hospital stay hits, do you have a way to pay for it? You should always try to keep an unused, available amount of credit for an emergency.

Another reason to consider opening another card has to do with what’s called credit utilization. Utilization measures how much of your credit you are using in relation to your total available credit. If you have one credit card with $500 charged to it and a credit limit of $1,000, then your utilization is 50%. There’s no ideal utilization to shoot for, because as with most things, it depends on everything else on your report. But as a general rule, you want to try to keep your utilization on any one card, and across all of your credit cards, below 50% to avoid the risk of hurting your FICO® score. Research has shown that people who max out a single credit card are more likely to miss future payments, and therefore the FICO score considers people using more of their available credit more risky than people who are using very little of their available credit.

Avoid a large number of credit cards

At the other end of the spectrum, if you have a large number of credit cards that can also be a difficult situation to manage as your credit debt grows. The more cards you have, the more likely it is that you will simply miss seeing a bill and making a payment. Paying your bills on time, even if it is the minimum, is one of the most important things you can do to avoid damaging your credit. Make sure you are comfortable managing the number of cards you have and the total minimum payment obligation you have to remain current.

If you have a lot of cards and it feels unmanageable, one instinct may be to close those cards so you don’t have to worry about them. We recommend you do not close credit cards you no longer need as a way of raising your FICO score. Instead, do what you need to in order to remove the temptation to use it, but keep the account open with no balance. Closing an account reduces the amount of available credit you have, and as a result your credit utilization will go up.

Don’t forget about APRs

In addition to the number of cards, their limits and the amount you use them, it’s also important to consider the APRs of the cards you are using. APRs are not currently reported by credit card companies to the credit bureaus, and therefore they cannot be explicitly considered when computing your FICO score. However, you should definitely know the APR of all your cards so you can add debt to a low APR card and pay it off from a high APR card.

Paying off cards with higher APRs devotes less money towards interest, and leaves more money available to pay down your balances.

It’s true that credit may be harder to obtain these days as many financial institutions are re-evaluating how they extend credit. Such changes in lending practices can be seen in the form of higher credit requirements to open accounts and lower credit limits being offered. That said, we don’t recommend that you accept promotional credit card offers just because you are being offered them. Opening new accounts can indicate increased risk to lenders and can hurt your FICO® score. Every individual’s situation is unique, but as a general rule, you should only apply for credit when you need it.


FICO® credit scores are calculated from the information in consumer credit reports. Whether a loan modification affects the borrower’s FICO score depends on whether and how the lender chooses to report the event to the credit bureau, as well as on the person’s overall credit profile. If a lender indicates to a credit bureau that the consumer has not made payments on a mortgage as originally agreed, that information on the consumer’s credit report could cause the consumer’s FICO score to decrease or it could have little to no impact on the score.

Credit card

In general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow you to carry a balance from one billing cycle to the next. However, you will usually have to pay interest on that balance. You likely also have to pay at least a certain amount of your balance each time you receive a bill.

Charge card

A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing cycle to the next. American Express and Diner’s Club are two well-known organizations that offer charge cards.

So what does this mean for your FICO® score? There are many ways to build one’s FICO score over time. Credit cards in general have a strong influence on the FICO score calculation. Charge cards can be just as effective as any other credit product in helping consumers establish a credit history.

Whether you have a credit card or a charge card, the most important factor in building or improving your FICO score is using credit responsibly. That means paying your bills on time and using your credit only when needed. If you can do those things consistently, you should be well on your way toward maintaining a good score.

Refinancing and loan modifications can affect your FICO® score in a few areas. How much depends on whether it’s reported to the credit bureaus as the same loan with changes or as an entirely new loan.

If it’s reported as the same loan with changes, three pieces of information associated with the loan modification may affect your score: the credit inquiry, changes to the loan balance, and changes to the terms of that loan. Overall, the impact of these changes on your FICO score should be minimal.

If it’s reported as a “new” loan, your score could still be affected by the inquiry, balance, and terms of the loan, – along with the additional impact of a new “open date.” A new or recent open date typically indicates that it is a new credit obligation and, as a result, can impact the score more than if the terms of the existing loan are simply changed.

Your servicer will likely use your FICO® score, along with other factors, to help determine the new terms of your loan, such as your mortgage rate. In general, your FICO score plays a key role any time you apply for new credit or change the terms of a loan. That’s why staying credit savvy and maintaining a good credit rating remains so important.

New Credit

Simply contacting your servicer with questions does not affect your FICO® score. If your service needs to check your credit, they must get your permission first. A credit check would result in an inquiry on your credit report, which can have a small impact on your score.

Any action after that may also impact your score; for example, if you pursue refinancing or loan modifications.

Some banks are lowering credit lines and closing accounts that have had little or no recent activity. These actions can hurt your score if they result in higher credit utilization (percentage of balance to credit limit); therefore, you’re going to want to preserve your credit lines by keeping your credit card accounts open and using them frequently – while, at the same time, maintaining low balances.

The surest way to get the most up-to-date and accurate information is to contact a number of lenders for their FICO® score requirements before shopping for credit. It’s also a good idea to obtain your current FICO score so you’ll know exactly where you stand in the eyes of these potential lenders.

Currently, lenders have less money to work with than in the past. When this happens and they’re faced with making fewer loans, lenders will make those loans to borrowers with the best chance of repayment – often, those with the highest FICO® scores. For this reason, it’s now more important than ever to make sure you’re handling your credit responsibly.

When you apply for credit, you authorize those lenders to ask or “inquire” for a copy of your credit report from a credit bureau. When you later check your credit report, you may notice that their credit inquiries are listed. The only inquiries that count toward your FICO Scores are the ones that result from your applications for new credit.

It’s important to know that there are 2 types of credit inquiries. Soft inquiries such as viewing your own credit report will not affect your FICO Score. Hard inquiries such as actively applying for a new credit card or mortgage will affect your score. Read below to see how much hard inquiries can affect your FICO Score.

Do credit inquiries affect my FICO Score?

FICO’s research shows that opening several credit accounts in a short period of time represents greater credit risk. When the information on your credit report indicates that you have been applying for multiple new credit lines in a short period of time (as opposed to rate shopping for a single loan, which is handled differently as discussed below), your FICO Scores can be lower as a result.

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 risk, but most Credit Scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on your credit scores.

How much will credit inquiries affect my score?

The impact of applying for credit will vary from person to person based on their unique credit histories. In general, credit inquiries have a small impact on your FICO Scores. For most people, one additional credit inquiry will take less than five points off their FICO Scores.

For perspective, the full range for FICO Scores is 300-850. Inquiries can have a greater impact if you have few accounts or short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six 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. While inquiries often can play a part in assessing risk, they play a minor part are only 10% of what makes up a FICO Score. Much more important factors for your scores are how timely you pay your bills and your overall debt burden as indicated on your credit report.

What to know about rate shopping

Research has indicated that FICO Scores are more predictive when they treat loans that commonly involve rate-shopping, such as a mortgage, auto, and student loans, differently. For these types of loans, FICO Scores ignore inquiries made in the 30 days before scoring. So, if you find a loan within 30 days, the inquiries won’t affect your scores while you’re rate shopping.

In addition, FICO Scores look on your credit report for rate-shopping inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry. For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.

What to remember when you are rate shopping

If you need a loan, do your rate shopping within a focused period such as 30 days. FICO 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 the inquiries occur.

When you look for new credit, only apply for and open new credit accounts as needed. And before you apply, it’s good practice to review your credit report and FICO Scores to know where you stand. Viewing our own information will not affect your FICO Scores.

The short answer is yes, applying for many new accounts often hurts your FICO® score more than applying for a single new account. There is no magic number of applications that you should limit yourself to, but in general, the fewer the better. In fact our research has shown that people who apply for credit multiple times within a short time period tend to over-extend themselves and are more likely to default at some point.

Applying for a single new credit card may have a small impact to your score, but if you apply for several credit cards, that can have a much greater effect on your score. The general idea to keep in mind is that rate shopping for home an auto loans will have less of an impact to your score than comparison shopping for credit cards or other types of credit accounts. A better practice when determining the best credit card is to read about the features of each card and then only apply for the one that has the features you want from your new card.

First off, don’t sweat this too much; applying for new credit only accounts for about 10% of your FICO score, so the impact is relatively modest. Exactly how much applying for new credit affects you depends on your overall credit profile and what else is already on your credit report. For example, applying for new credit can have a greater impact on your FICO score if you only have a few accounts or a short credit history.

That said, there are definitely a few things to be aware of depending on the type of credit you are applying for. When you apply for credit, a credit check or “inquiry” can be requested to check your credit standing. Let’s take a look at the common inquiries you might find on your credit report.

Credit Cards

When it comes to credit cards, always ask yourself “Why am I getting this card?”. If your answer is need-based, such as needing credit for increasing expenses or wanting a lower interest rate to reduce monthly payments, then these may be perfectly legitimate reasons to open a new card. However, if you want a new card because it has a pretty logo or it’s from your alma mater, then you might want to think twice. We recommend you only apply for new credit cards that you really need. When deciding if you need an additional card, it’s also important to be aware of what’s called credit utilization.

After asking yourself “why you need more credit”, then ask yourself “How much more credit do I need?” If you only need a small amount to pay additional bills for a few months, try contacting your existing credit card companies to get your credit limits raised first. Why is this a better option? While a request for an increased limit may count as an inquiry just like opening a new card would, it won’t reduce the average age of your credit accounts, which is also important for your FICO score.

If getting the limit raised on an existing card isn’t an option, then try to apply for the fewest number of credit cards so that the combined credit limit meets your needs. If you think you need an extra $5,000, try to get one card with a $5,000 limit rather than two cards each with a $2,500 limit. When applying for new credit cards, each application is counted separately as an individual inquiry on your credit report, and the more inquiries you have, the more that could hurt your FICO score. Historically, people with six inquiries or more on their credit reports are eight times more likely to declare bankruptcy than people with no inquiries on their reports. So having more inquires makes you look more risky to potential lenders.

Home & Auto Loans

Rate shopping for a home or car is a smart practice, so your FICO score won’t penalize you for doing this. You might even want to check out what rates you can expect ahead of time based on your FICO score using our free calculator. As you’re rate shopping, multiple lenders may request your credit report to check your credit. We’re aware this goes on, so your FICO score doesn’t even consider any mortgage or auto inquiries made in the 30 days prior to calculating the score. So, do your homework ahead of time, decide on the companies to get quotes from, and try to do all the rate shopping and get the loan within 30 days. Not only will the rates be easier to compare when the quotes are closer together, but it will have no immediate impact to your FICO score.

Given rate shopping for home and auto loans has no immediate impact, why do you even see an inquiry on your credit report? While home and auto loan inquiries may appear on your report, after the initial 30 days your FICO score counts all those inquiries that fall in a typical shopping period as just one inquiry. So try to do your rate shopping within a matter of weeks as opposed to a matter of months to limit the longer-term impact as well.

The growth of the student loan industry has increased public interest in how lenders assess the credit risk of young college-bound adults. Both large and small lenders often use FICO® credit scores to help them underwrite student loans. How the FICO credit scoring formulas treat credit inquiries depends on the way in which those inquiries are reported by lenders to each of the three credit bureaus. If the inquiries are reported by the lender in a manner that indicates rate shopping for a single loan (such as a mortgage, auto, or student loan), the FICO scoring formula reflects that in its calculation of your score (for a more comprehensive discussion of rate-shopping and inquiries, click here). In general, student loan shopping inquiries made during a focused time period (for example 30 days) will have little to no impact on your score. In the rare instance in which a credit inquiry related to a student loan is not coded so that it receives our special rate-shopping inquiry logic, that inquiry typically would decrease one’s FICO score by only a few points.

What’s the best advice for people shopping for student loans so they protect their FICO scores?

Doing a little homework first is always a good idea no matter what type of credit you’re seeking. As you’re shopping for the best student loan rate, the lenders you approach may request your credit report or credit score. You can generally avoid having those inquiries affect your score if you finish your rate shopping in a reasonable amount of time. That’s easier if you first do your homework ahead of time and decide which companies to get quotes from. Then try to finish your rate shopping and finalize your loan within 30 days. Not only will loan rates be easier to compare when the quotes come only a few days apart, but you also will protect your FICO score.

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