How Multiple Loan Applications Can Affect your Customer’s Credit Score

If you are looking to finance your home, get a credit card, or receive any other type of personal bank loan in the U.S., your credit score will be one of the key factors that will determine whether you’ll be approved or not.

Based on the impact a credit score can have on consumers’ financial lives, one could assume most consumers understand what their credit score is and how it is calculated. Surprisingly, this is not the case.

A recent 2018 survey commissioned by LendingTree found that nearly 4 in 10 Americans have no idea how their credit scores work. That is why it is important for you to educate your customers on how applying for financing can impact their credit score.

In the event that customers want to finance their job, but let you know they want to shop around to get the most competitive rate first, you need to inform them that multiple credit score inquiries will very likely have a negative impact on their overall credit score.

As a matter of fact, the number of inquiries made on an individual’s credit score in a year affects 10% of every American adult’s total score.

This means that if your customer’s credit score is 700, up to 70 points of his or her score can be negatively affected by too many credit score inquiries. 

Chart based on FICO Score table provided in Credit Karma post

At its worst, this can take down your customer’s credit score from good standing (670-739) to a score of 630 fitting the category of fair credit (580-669), and suddenly make him or her ineligible to qualify for a Prime loan.

To help your customers avoid this situation, you need to explain to your customers how credit inquiries work.

We can begin by looking at the two types of credit score inquiries that can be made by lending entities.

The first one is a hard inquiry. This type of inquiry is based on a voluntary application a customer made for credit, whether that be a credit card or other credit line, and it will have an impact on that customer’s credit score.

The second type of credit inquiry is referred to as a soft inquiry, or soft credit pull.

Generally, these are inquiries made by an individual’s potential employer, or by a business with whom the customer may already have a credit line open.

In contrast to hard inquiries, these soft inquiries are not calculated into their credit score.

They’re also not visible to lenders and creditors on a credit report and only the consumer may access them.

Why multiple applications have a negative effect on credit score

© People holding question marks created by freepik –

The reason why multiple hard inquiries can potentially lower your customers’ credit scores is because for credit scoring companies, too many inquiries on any customer’s credit report over a short span signal that customers could be taking on too much debt, or may be in some kind of financial trouble and looking for credit to bail them out.

So, if prospective customers applied to 10 financing entities for credit, credit scoring companies will count each application as a single inquiry, and their credit score will be negatively affected.

Important exceptions to this credit score policy

Credit scoring companies will allow multiple financing applications to be done within a certain period of time (typically a 60-day time frame) for these types of loans only: mortgage, car loans, and certain specialized type of loans, most notably student loans.

Unfortunately HVAC loans do not fall under this special exception category. So applying for multiple loans for an HVAC job will put consumer’s credit score number at risk of getting lowered.

How Credit for Comfort can help keep customers’ credit scores safer

The Credit for Comfort financing app can help your safeguard your customer’s credit score with the waterfall feature. Here’s how it works:

Credit for Comfort enables all users to apply for and offer two financing options, Prime and Second Look financing, to suit your customers’ varying needs through 2 of our lending partners: GreenSky and Fortiva.

Thanks to our waterfall feature, you can give each customer the opportunity to apply for Prime credit first (requiring a hard credit pull) and offer them a chance to apply for Second Look immediately after if they’re not approved, with only a soft pull that will not impact their credit score.

In this way, you increase your chances of selling to different buyer types and also increase your chances of closing on more sales.

Get started and book a demo now!

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Fiorella Cotrina
Fiorella Cotrina is Content Manager at Watsco Ventures. She can be contacted at

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