When you apply for a credit account, your prospective lender pulls your credit report and initiates a credit check through a process known as a hard credit inquiry.
That usually takes points off your score, so it’s best to limit the number of times lenders pull your credit.
However, when shopping for a home loan, that doesn’t necessarily apply. If you time them correctly, multiple credit pulls from mortgage lenders count as a single credit inquiry, which minimizes the damage to your score. Here’s how it works.
How Many Times Can You Pull Credit for Mortgage?
In general, pulling your credit to apply for a new credit account triggers a hard inquiry, and hard inquiries take points off your credit score.
When shopping for a mortgage, it’s best to compare multiple options, which usually requires letting lenders pull your credit multiple times.
That would typically cause multiple credit inquiries and hurt your score, but the credit scoring models acknowledge the necessity of rate shopping for a home loan.
As a result, so long as you fit them in a short enough window, all mortgage-related inquiries on your credit count as one.
The rate shopping exception only applies to credit accounts that require you to compare multiple options for the lowest possible interest rate, like an auto loan, student loan, or mortgage – not a credit card.
In addition, rate shopping only works when you stick to one type of credit account. If you refinance your car loan while you’re rate shopping for a mortgage loan, it will count as two separate inquiries.
Fortunately, you don’t necessarily have to submit an official application to a mortgage lender anymore to get an idea of what they can offer you.
Many lenders now have pre-approval tools that you can access online. When you give them your information, the tools initiate a soft credit check, which doesn’t show on your credit report.
How To Rate Shop the Smart Way
Credit scoring models expect you to compare multiple offers when you’re looking for a mortgage loan. FICO and VantageScore design their scores to account for rate shopping and treat those inquiries as one.
However, that doesn’t mean you can haphazardly apply for accounts without a plan. You might think you’re rate shopping, but if the scoring models don’t see it that way, you’ll still hurt your score.
Here’s what you should know to rate shop for a mortgage loan safely.
Limit Your Credit Pulls to a Two-Week Window
All credit scores allow a rate shopping window, but they’re not necessarily the same. VantageScore scores and FICO’s older ones use a 14-day window, while FICO’s latest scores allow you a 45-day window.
As a result, it’s unlikely that every mortgage lender you’ll apply to will use a credit score with a 45-day window. And because lenders don’t generally advertise which credit scores they use, you probably won’t know either way.
Therefore, the safest course of action when rate shopping is to keep all your credit pulls within a two-week window.
Note that lenders often pull your credit more than once as part of the mortgage process. They’ll usually check your credit once when you submit your mortgage application and again when you close on your property.
The latter is a soft credit pull and won’t hurt your credit score, but it will show changes to your credit.
Try not to do anything during that period that might jeopardize your mortgage loan, like racking up debt and increasing your credit utilization or taking out a new credit card.
Get Your Own Credit Report To Have an Idea of Your Credit Score
There are many significant differences between mortgage lenders, including the level of credit scores they’re willing to accept.
For example, if you’re shopping for a VA loan, most lenders have a minimum credit score requirement of 620. You probably won’t get the best terms with that score, but you should still be able to qualify.
In contrast, you may be able to find some lenders that will give an FHA loan to a borrower with a credit score as low as 500, though they’d require at least 10% down to make up for the bad credit.
Get an accurate understanding of your creditworthiness before you apply so you can narrow down your list of potential lenders.
It will make it much easier to keep your rate shopping within a two-week window and checking your own credit never hurts your score.
How Long Do Hard Inquiries Remain on Credit Reports?
Credit reports contain a detailed record of your credit history, but they don’t retain that information forever. All items age off of it eventually, and hard inquiries do so faster than most.
You’ll see them disappear from your credit report after just two years, though they’ll stop affecting your credit score after one.
For comparison, most negative items remain on your credit report for seven years, and some types of bankruptcy can stick around for as long as ten.
Like credit inquiries, they’ll stop affecting your credit as much before they disappear from your credit report though. FICO and VantageScore both emphasize your most recent behavior over your older credit history.
Note that if you trigger multiple hard inquiries while rate shopping, all of them will show up on your credit report, but they’ll affect your credit score as if there were only one.
These rules are consistent at each credit bureau, so you don’t usually have to worry about one credit reporting agency holding onto the information longer than another.
FAQs
How Many Points Do Mortgage Inquiries Affect Credit Scores By?
A hard credit check from a mortgage lender doesn’t take any more off your score than the one you incur for any other credit account. It’ll cost you the same number of points, which FICO says is usually less than five.
That said, everyone’s credit profile is unique, and you may see a greater or lesser impact from a hard credit pull, depending on your credit history.
For example, if you already have five hard inquiries affecting your credit, adding a sixth might do more significant damage to your score than it would if you had only one on your report.
Regardless, it’s unlikely that credit inquiries are going to make or break your credit. New credit activity is only worth 10% of your FICO scores.
If you submit a mortgage inquiry through a pre-approval tool that only initiates a soft credit inquiry, it won’t cost you any points.
How Many Mortgage Lenders Can I Apply With?
In theory, you can apply to any number of mortgage lenders. It’s also unlikely that any of them would turn away your application because you’ve submitted too many in the past, for several reasons.
For one, hard inquiries don’t hurt your credit very much. They’re only worth 10% of your score under the FICO credit scoring model, which most mortgage lenders use.
It also ignores applications made in the previous 30 days. That means your most recent inquiries won’t affect your chances with a mortgage lender.
The rate shopping rules have no lender limit either, so as long as you keep your mortgage applications within a two-week window, they’ll all count as a single inquiry, even if they’re with multiple lenders.
In fact, it’s often a good idea to apply to several creditors and to let each one know that you’re prepared to work with a different lender.
It may encourage your loan officer to compete for your business if you have good credit, which could get you a more favorable mortgage rate.
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