Before you buy a house, you should request quotes from several lenders to get the best interest rate you can. You may have heard that having a lot of credit inquiries can hurt your credit score, but getting several mortgage quotes shouldn’t have much of an effect on your score if you request them within a short window of time.
How Can Hard Inquiries Affect Your Credit Scores?
A hard inquiry is a formal review of an individual’s credit report. It happens when a consumer applies for a loan or credit card. When you apply for a mortgage, lenders will make hard inquiries that will be reported to the three major credit reporting bureaus: TransUnion, Equifax and Experian.
If you applied for several credit cards in a short period of time, numerous hard inquiries would hurt your credit score. Applying for multiple lines of credit could create the impression that you were in financial trouble. Things will work differently if you request several mortgage quotes.
Credit bureaus understand that people who are interested in buying a house shop around for competitive loan terms. If numerous mortgage lenders pull your credit reports in a short period of time, the credit bureaus will treat all those hard inquiries as if they were only a single review of your credit report. That means that you can request mortgage quotes from as many lenders as you would like without worrying that it would cause major damage to your credit score.
When to Request Mortgage Quotes
There are several FICO scoring models and lenders can decide which to use. If lenders use the new model, all credit pulls related to mortgage inquiries that are done within 45 days count as one inquiry. If lenders use the older scoring model, the window is shorter. In that case, all inquiries within 14 days count as one inquiry.
To be on the safe side, request all your mortgage quotes within a 14-day period. Applying for several mortgage quotes in two weeks is not as difficult as you may think. All the lenders will ask for the same information. You might even be able to get all the applications done within a few days.
How Much Will Your Credit Score be Affected?
Although hard inquiries can lower your credit score, requesting mortgage quotes will likely have a small effect on your score. The exact amount of the decline will depend on your individual circumstances. If you have a lengthy credit history and pay your bills on time, your score won’t be affected as much as it would be for someone with a shorter credit history.
Check Your Credit Reports
Before you apply for mortgage quotes, request copies of your credit reports. If you find any errors, dispute them so that when you apply for a mortgage, lenders will have accurate data and you won’t be penalized for outdated or erroneous information.