How many times can you get your credit checked when you’re applying for a home loan before it starts to tank your credit score? Tons of people we talk to at my company are terrified of their score dropping especially when they start talking to multiple lenders who all want to pull their credit. Today we’re going to talk to you about the truth behind hard credit inquiries and how it affects your score so that you know what to expect when you’re out there shopping for a home loan.
Hard mortgage inquiries
Hard inquiries on your credit are usually a big problem for your credit score. If you’re going to be applying for credit cards at every store in a mall like Banana Republic, and Target, and Nordstrom all within a short window your credit can see a pretty big drop in a short window – however, when you’re checking your credit from a mortgage company – either a lender or a mortgage broker, the typical drop in your score that you will see is 0 to 3 points.
That’s right, oftentimes when you pull your credit for a mortgage you won’t see any drop in your score at all but I’ve never seen it drop more than 2 or 3 points from a mortgage inquiry. Why is that? Well, the credit companies tend to like mortgage debt. This entire country was built around supporting and favoring homeowner’s. From tax breaks to incentives on loans, people who buy homes in this country tend to be more responsible with their income as a whole than people who just rent.
As a result of this fact the three credit bureaus don’t really penalize you when you’re shopping for a house because it’s not an impulse buy like a car or a clothing shopping spree can be.
Shopping with multiple lenders
But what about shopping with multiple lenders, you may ask? Well, there’s more good news there. The credit companies give you anywhere from 30-45 days to shop around for a mortgage without getting additional hits by running your mortgage multiple times. I say 30-45 days because the credit companies don’t ever give us exact data but you have at least a month to shop around without being penalized.
I wouldn’t go out and run it with 12 different lenders just for fun or anything like that, but I’ve often been the third, fourth, or even fifth mortgage broker who has run a client’s credit and their score hasn’t budged at all – not one point.
In the big scheme of things, running your credit for a mortgage is one of the least harmful things you can do to your credit. When you compare it to being late on a payment, or disputing a charge, or using too much of your available credit line – getting your credit run with a handful of lenders should be the least of your worries, honestly.
Unfortunately, getting your credit run is a necessary step to getting approved for a mortgage. There’s simply no way around it, and that’s another reason why the credit companies don’t ding you too much – they get that it’s necessary.
However, if you have an IDEA of what your credit is and just want to poke around and see what the payments would look like a good mortgage broker should be able to get you some numbers within minutes of talking to you. So if you’re just in the beginning stages of shopping for a home or refinance and are curious if the numbers make sense, then getting a mortgage broker or lender to run some numbers for you is not a big ask even before running your credit.
If I’m being honest 9 out of 10 borrowers that I compile full 3 page loan estimates for I do so without running their credit, I just use what credit they tell me they have and explain that if things look good and they want to move forward they will have to fill out a loan application and at that point I’ll run credit…and of course if the score is higher or lower than what they thought that’s a conversation we have.
By the way, the easiest way to have an idea of what your credit is (at least a ballpark number) is to sign up with one of the many free services out there like creditkarma.com.