Long Loan Shopping Could Hurt Your Credit Score

It’s a good idea to shop around for a loan to make sure you get the best terms and even better the lowest interest rate. But, loan shopping could hurt your credit score.

An inquiry is placed on your credit report each time a lender checks your credit history to qualify you for a loan. Your credit report is a compilation of most of your credit and loan accounts and is the key factor used to determine your credit score. Credit inquiries count for 10% of your overall credit score. Each additional inquiry can knock your credit score down a few points, affecting your ability to qualify for another loan.

The model for the FICO score – the most well-known and widely-used credit score – helps protect you from the impact of rate shopping for mortgage and auto loans. The scoring model essentially ignores inquiries made within a 30-day window while you’re rate shopping. So, if you find a loan during that time, your lenders never know you’ve been putting in loan applications all over town. Even after the 30-day “grace period” is up, all the inquiries you’ve made are treated as just one inquiry when your credit score is updated.


The FICO score calculation has been updated a few times over the years, so the length of the grace period depends which credit score calculator your lender’s using. One model has a 14-day grace period, another uses 30-days, and the newest model uses a 45-day time span.

It’s important to note that the loan-shopping grace period for credit report inquiries only applies to mortgage and auto loans. If you’re shopping for another kind of loan, you don’t get the convenience of hidden inquiries. When you’re on the market for a personal or student loan, your best bet is to find a loan within a few days before the credit report inquiry makes it to your credit report. Otherwise, your credit score will feel the full brunt of your rate shopping. Then again, inquiries only count for 10% of your overall score, so they couldn’t hurt that much, could they?