Ask Money

Comparison shopping and credit scores

Chris Farrell Mar 8, 2011

Question; I recently shopped around for a mortgage refinance. (Comparison shopping is good, right?) I got quotes from a few companies, but to do this, the companies ran credit reports and sent me the results. The scores were good (720-750-780) but in the summary, it noted that my score was lowered because of “too many inquiries.” In the past year, we changed insurance companies because our old carrier raised our rates about 40% even though we have never filed a homeowners claim and haven’t had an auto claim since 2003 and we took out 2 new credit cards (one for international travel-no foreign currency transactions, and one for day-to-day use as it had better cash back). This doesn’t seem excessive to me. Further, it seems to me that shopping around am a good financial habit, so why would my credit score be hurt because I comparison shop? Thanks, David, Marion, IN

Answer: Go ahead and comparison shop. It’s always a good idea.

There’s much in the credit scoring business that doesn’t make sense to me, but the industry does take into account comparison shopping.

If you’re in the market for a single loan, say, a mortgage (or refinancing), an auto loan, or a student loan you won’t be penalized for seeking out the best deal so long as its done over a short period of time, defined as one to 2 weeks.

Although your actions were far from excessive, my guess is that your scores took a modest hit with the two new credit cards or maybe you stretched out your refinancing queries. This booklet from Fair Isaac, the giant of the credit scoring industry, gives you the lowdown on the credit score calculation and the impact of loan applications and new loans on your credit score. By the way, you still have a very good credit score.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.