When you are shopping for a mortgage, the lender has to pull your credit report to see if you qualify and what your credit score is. The issue has always been how do you compare lenders without having your credit score drop due to more than one company pulling your credit report. The credit bureaus all tell us that your credit score will not drop when your lender pulls your credit report.
Because the credit bureaus know that you want to compare rates and terms, the scoring modules can tell if the inquiry is a mortgage related inquiry. In fact myfico.com states that "Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score." Older scoring models had a shopping time frame of 14 days, the newest ones are 45 days. Each lender selects their formula they want the credit bureau to use to calculate the credit scores.
Applying for a mortgage or car loan is different than applying for a credit card. A mortgage or car loan start with the high balance and over time it is paid down to zero. A credit card typically starts with a zero balance and over time the limits may increase to allow for more debt. Also you usually will only have one mortgage and maybe one or two car loans, but you may have several credit cards.
It doesn't hurt to get more than one rate quote, but in order to get an accurate quote, your lender needs your credit score. So do your shopping within a short time frame and don't be afraid to get more than one quote. The other option is to talk to different lenders and tell them your score, but know that until the lender pulls your credit report, they can't lock in the rate.
A mortgage inquiry may lower your score by about 5 points, but getting more than one shouldn't lower your score any more than that. The majority of your credit score is based on your payment history and the amount of credit used. Inquiries only account for about 5-10% of the total score. If you know you are close to a specific score required for your mortgage, you may want to be more careful about inquiries.
When shopping for a loan, make sure you give the loan officer the same information and all the information needed to make an accurate decision. Make sure they know the amount of the loan, what type of loan and your down payment. To give you an accurate rate quote, the lender needs to have your credit score, type of loan and the loan amount plus the number of days you need before you close. With that information they should be able to give you an accurate quote. Remember that rates change daily and sometimes more than once a day. It really helps if you can do your shopping all in one day to get current information!
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email - Website
