If I had one dollar for every person that said, “Please tell me what I can qualify for but do not pull my credit because I know it hurts my credit score,” I would have enough money to make a large down payment on almost any house I wanted.
Credit Score Myth
You shouldn’t apply to multiple lenders because all those inquiries will tank your score.
Wrong!
Credit Score Truths
Yes, when you apply for credit, such as to get mortgage loan offers, a hard inquiry is recorded on your credit file.
Yes, hard inquiries have the potential to lower your score.
No, mortgage inquiries – even multiple inquiries – will not kill your credit score.
The credit scoring agencies give a special allowance to home shoppers. The reason is simple. They don’t penalize smart consumers for shopping for the best loan, and you can’t compare loans until you get firm offers based on loan applications.
Credit scores are based on complex algorithms, and here’s what’s interesting. The scoring agencies can distinguish between the activities of Person A, who is applying for multiple new credit cards and the activities of Person B, who is shopping around for the best home loan. All inquiries are coded to the lender’s industry and the type of credit you’re applying for.
Credit cards are issued when your application is approved. A mortgage, however, is not a done deal until the offer is accepted and the loan closes. Person A has the real potential to fall into unaffordable debt because those multiple applications can open the door to racking up who knows how much in charges.
Person B has no new credit yet!
Mortgage Shopping and FICO
When you apply with a mortgage lender, those inquiries are completely ignored by FICO for thirty days. Then, all inquiries coded from mortgage lenders and made within a 45-day window are counted as one inquiry against your credit score. Older FICO score models gave 14 to 30 days, and VantageScore still only gives 14 days. You probably won’t have any way to find out which credit score model a lender uses.
Mortgages and Your Credit Score: The Facts!
You can apply with one lender or one hundred lenders. NONE of the inquiries will show up in your FICO score within the first thirty days.
After thirty days, ALL of the mortgage inquiries made during the rolling rate-shopping window allowed by the credit score model will show up as a SINGLE inquiry. That single inquiry could cause your score to drop by a few points, but unless you’re right on the cusp between two credit score ranges, the drop probably won’t affect your ability to get credit. And by the time the single mortgage lender inquiry shows up on your credit report, you will hopefully have already chosen a loan offer to accept.
Inquiries remain on your credit report for two years, but stop counting against your score after one year.
Check your credit for free on a reputable site like Credit Sesame or Credit Karma. Your bank or credit card issuer may also offer free access to your credit score, so call them. The score you see is educational and it may be different from the score a mortgage lender sees, but it’ll give you a general idea of where you stand. Then you can prequalify for a mortgage, which doesn’t affect your score at all, and we can get the process started.
Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.
