In a marketplace where lenders are demanding record-high FICO credit scores — Fannie Mae and Freddie Mac are averaging around 760 on approved mortgages this year — are you a little fuzzy about what can push your score up or down?

Take “inquiries,” which Fair Isaac Corp., the developer of the iconic score methodology dominant in the mortgage field, says are among the most widely misunderstood components of its system. Do multiple inquiries — requests by lenders and others to pull your national credit bureau reports — knock your score down? Do you know whether your lender is entering the correct code to minimize damage to your score when you’re shopping for a mortgage and generating lots of inquiries? If you’re young or otherwise new to the world of credit, could multiple inquiries do enough damage to prevent you from getting approved for a home purchase?

Given the importance of maintaining high scores, FICO senior scientist Frederic Huynh agreed to run through the key rules governing how inquiries affect homebuyers and mortgage applicants in an interview with me and in a post on Fair Isaac’s Banking Analytics blog.

Start with the basics: Yes, racking up large numbers of inquiries can lower your score. The FICO models consider such numbers significant because extensive behavioral research has shown that “consumers who are seeking new credit accounts are riskier,” more prone to defaults, according to Huynh. “Statistically, people with six or more inquiries on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports,” he said. So inquiries do matter.

Read more at the Washington Post: http://www.washingtonpost.com/realestate/to-keep-their-fico-scores-up-homebuyers-should-know-the-rules-of-credit-reporting/2012/06/07/gJQA3SMuNV_story.html