“Inquiries take a year to have no impact on scores and two years to completely drop off credit.

Every time a consumer goes to a 3rd party to apply for a credit card, credit limit increase, overdraft on a checking account, mortgage application, line of credit, car loan, student loan, and most financing, a view of the individuals credit occurs by the potential creditor. These third party views are called hard inquiries. Hard inquiries can have a negative effect on credit. When applying for a credit card, limit increase, overdraft on a checking account, or any revolving credit approvals, the hard inquiry they generate will drop scores 2-5 points each. If there are extreme inquiries over a period of time the scores can drop even further. For mortgage, student loan, and car financing inquiries consumers have a window of time to shop where inquiries have less of an impact. It used to be the window was 14 days, now it is a 45 day window. An example of a 45 day window follows:

Mr. A applies for a mortgage on day 1 with Bank of America. BOA pulls his credit, day 5 he applies with Wells Fargo, and day 35 he tries out Citibank. Those three hard inquiries will drop his credit score 2-5 points as if it is one inquiry. If Mr. A continues to apply for mortgage approval after the first 45 day period the inquiry(s) can drop scores further. The score formula will view batches of inquiries within that 45 day period as one credit review and score drops will be 2-5 points, as if it was one inquiry. However, if Mr. A winds up with extreme inquiries (many over a period of time) the score can drop dramatically. Inquiries take a year to have no impact on scores and two years to completely drop off credit.”

- Tracy Becker, FICO Pro

http://www.linkedin.com/in/11111tracy