Too Many Credit Inquiries: What You Need to Know
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Avoiding Too Many Credit Inquiries: What You Need to Know

Understand the dangers of too many credit inquiries and learn strategies to minimize their impact on your credit score.

dangers of too many credit inquiries

Understanding Credit Inquiries

As a small business owner, understanding the dangers of too few accounts and too many hard credit inquiries is essential for business success. Familiarizing yourself with your credit reports and how to minimize credit inquiries and their impact on your credit score. These strategies will enable you to maintain a healthy credit report and secure the financing you need to grow your business.

What are Credit Inquiries?

A credit inquiry occurs when a lender or credit card company checks your credit report to assess your eligibility for a loan. You authorize this check, and within days or weeks, it registers on your own credit report with one or several credit bureaus. Multiple inquiries can lower your credit score, complicating future loan and credit line approvals. Hard inquiries happen when a lender reviews your credit report post-application, potentially dropping your score temporarily. Soft inquiries, like checking your own report, don’t typically impact your credit score. New credit inquiries can hurt your FICO score by suggesting to potential lenders that you are seeking more credit, potentially signaling financial strain or excessive debt. This perception can decrease your score, making it harder to secure credit in the future.

Different Types of Credit Inquiries

There are two types of credit inquiries: hard credit scores and soft credit scores on lines.

  • Hard inquiries: These occur when you apply for new credit, such as a loan or credit card, and can temporarily drop your FICO score.
  • Soft inquiries: These happen when you check your own credit score or are pre-approved for a loan and do not affect your FICO score.

The danger comes from too how many hard credit inquiries. Multiple hard inquiries in a short period can lower your credit score, making it harder to get loans and increasing borrowing costs.

Credit Score Impact

How do Credit inquiries affect your credit score?

  • A hard credit inquiry typically reduces your credit score by around five points.
  • The impact of multiple hard inquiries on your credit score depends on your individual credit history.
  • Those with a long credit history and multiple accounts can expect less of a drop than those with a short credit history and few credit accounts.

Rate Shopping vs. Shotgunning Credit 

Rate Shopping

The practice of comparing interest rates and terms from multiple lenders or credit bureaus before choosing a loan or credit product, is called rate shopping. This practice allows you to find the best offer available based on your financial situation and needs. It’s important to do all of your rate shopping within a short period of time to minimize the impact on your credit score.

This application process involves researching; contacting banks, credit unions, and online lenders to gather information; and comparing terms and rates. Rate shopping helps you avoid the dangers of too many credit inquiries by:

  • Reviewing competitive pricing
  • Receiving better loan options
  • Comparing lower interest rates
  • Finding flexible terms
  • Reducing risk on your credit score
  • Increase your chance of finding favorable terms

Rate shopping has many perks. You can compare prices and find the best deals on credit products, ensuring competitive pricing. It helps you discover better loan options than a single lender might offer and minimize the ding to your credit score. By comparing interest rates and loan terms, you can secure lower rates and monthly payments. Plus, the credit scoring model helps you find loans with flexible repayment terms to fit your needs. Multiple inquiries from rate shopping are usually treated as one event by credit scoring models, so they won’t hurt your credit score. Ultimately, rate shopping lets you create a personalized financial plan that meets your unique goals.

Shotgunning Credit

Shotgunning credit, on the other hand, is applying for multiple credit products (like a business loan, a mortgage, a student loan, an auto loan and a new credit card) all in a short period of time. This can have several negative consequences:

  • Lower credit score due to multiple hard inquiries
  • Increased risk of rejection or higher interest rates
  • Higher debt levels, affecting your credit utilization ratio and financial health
  • Unmanageable debt
  • Negative impact on your credit history
  • Increased risk of identity theft from repeated sharing of personal information

Shotgunning credit applications can hurt your credit score. Multiple hard inquiries can lower your score and make it harder to get approved for future credit or loans. Lenders may see this as a sign of financial instability, leading to rejections or higher interest rates. It can also increase your debt levels, negatively affecting your credit utilization ratio and overall financial health. Managing this debt can be stressful, and the impact on your credit history can hinder future approvals. Plus, multiple applications can increase the risk of identity theft as your personal information is repeatedly shared.

Credit Report Review

How to Check your credit report for Inquiries

  • You can check your credit report for free with Borrowell to review your credit inquiries.
  • Soft inquiries, such as checking your own credit report, will not impact your credit score.
  • Hard inquiries are visible to anyone authorized to check your credit file.

Minimizing the Impact

Strategies to minimize the impact of credit inquiries

To minimize the impact on your credit report, do your rate shopping within the allowed time window when applying for a loan or credit line. Take advantage of rate-shopping period exceptions for mortgages, auto loans, and personal loans. FICO scores consider the time between inquiries to distinguish between a single loan or free credit score inquiries and multiple hard inquiries or credit line searches. Space your credit card applications to avoid multiple hard inquiries in a short period of time. Additionally, review your credit reports regularly to identify any errors. If you’re not ready to apply for a full personal loan yet, don’t let lenders access your credit report.

Credit Score Protection

Tips to protect your credit score from excessive inquiries

  • Practice good credit habits like always paying your bills on time and in full.
  • Avoid applying for multiple credit cards or loans in a short period of time.
  • Consider rate shopping for a loan within a short time frame to minimize the impact of multiple hard inquiries.
  • Monitor your credit report regularly to detect any errors or fraudulent activity.

The Bottom Line


  • Too many credit inquiries on your credit report can make you appear riskier to lenders.
  • Try to keep the number of hard credit inquiries under six.
  • New credit inquiries only account for 10% of your credit score.
  • Practicing good credit habits like always paying your bills on time and in full will have more of an impact on your overall credit score.

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