How Will Multiple Mortgage Credit Inquiries Affect My Credit Score?
This is an important question to know the answer to. No one wants to do anything intentionally that could lower their credit score, but on the flip side, you want to be a smart consumer and shop for the best rate.
Because I prefer to step into a situation fully informed, one of the things I always want to do upfront is pull a current credit report.Many of my referrals are people who have been working with another lender but were directed my way for various reasons- difficult scenario, turn times too long at the other company and the classic... unresponsive loan officer.
More often than not, there is a bit of push back .
I don't want my credit report pulled again. I was told that multiple mortgage inquiries affect my credit score.
Not nearly as much as you think
Being in the mortgage industry doesn't mean that I know exactly what goes on the magic curtain that is the credit scoring algorithm. What I do know is that inquires are not all alike.
There are two types of inquiries recognized by all credit bureaus:
Soft inquiry - This is what happens when you receive a pre-approved credit offer, or you use some specific credit monitoring services.
Hard inquiry-These inquiries happen as a result of your application for credit - mortgage application, auto loan, credit cards etc.
Soft inquiries will generally not appear on a mortgage credit report and they do not have an affect on your credit score.
Hard inquires will show up on your mortgage credit report. Applying for multiple credit lines in a short period of time can affect your credit score. However, an inquiry's impact on a credit score is minimal as compared to the other factors that make up your credit score.
The impact is further minimized when those inquires are a result of rate shopping for a single loan as is common in mortgage, auto and student loans.
CREDIT CARD INQUIRIES DO NOT FALL IN THE SAME CATEGORY FOR RATE SHOPPING.
The most common FICO credit models used today ignore multiple mortgage credit inquiries that happen within 30 days, therefore having no affect on credit scores. The newest versions of the scoring formula consider 45 days to be the shopping period but few lenders are utilizing the newest versions.
So, if your previous lender pulled a credit report on 6/4/13, and you come to me on 7/1/13 requesting a second opinion, you have two choices.
- Provide me a complete copy of that credit report so I can properly analyze it. What? You never got a copy of it? Well then...
- Let me obtain a new credit report now! It will be within the shopping period and I'll eventually have to obtain a credit report of my own when you realize that leaving your unresponsive lender for me is what you should do.
It is important to note that a mortgage credit report may show different scores than the report you obtained online or even the report you got when you applied for a car loan. Each report is formulated using different scoring formulas, this is why it's important to view a recent mortgage credit report.
There are many theories, myths and misunderstandings about how credit scores work. There is no exact number that I can provide to answer how multiple mortgage inquiries will affect your credit score.
One thing is for certain, not paying your debts on time will definitely affect your credit.
Be an informed and responsible consumer.
Laura Borja ♦ Senior Mortgage Consultant ♦ Hablo Español
(858) 3-LOAN-SD (356-2673) ♦ laura@lauraborja
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