Multiple Credit Score Checks Perfectly Normal, Says Financial Analysts
Borrowers in search of the best mortgage rates needn’t worry about multiple credit score inquiries, or “pulls,” say financial analysts.
According to the New York Times, a common myth disseminated among borrowers is that the more credit pulls mortgage lenders perform, the likelier the chance the credit score will go down. This is simply not true, according to John Ulzheimer, a credit expert from Credit Sesame, a website that aids borrowers in managing their credit.
“There is logic in place that protects consumers’ credit scores from any negative impact caused by multiple inquiries as a result of rate shopping,” he said.
Ulzheimer went on to explain that one of the standard credit scoring models, FICO (which is required by gigantic mortgage lenders Fannie Mae and Freddie Mac), has a judicious method of processing and analyzing credit pulls. Credit pulls for mortgage loans less than 30 days old are ignored. Pulls older than 30 days are processed but multiple pulls made within 45 days of each other are considered to be one inquiry. Inquiries older than a year aren’t even counted.
Scoring systems usually realize that multiple credit pull requests simply indicate that the borrower is probably shopping around for an advantageous mortgage, Ulzheimer said.
Even if multiple credit inquiries are made beyond the 45-day timeframe, that still isn’t enough to affect a credit score, according to Daniel Sater, the owner of Credit Scoring Advisor in Long Island.
“It probably wouldn’t hurt you even then,” Sater said. “One or two isn’t a significant risk factor in determining your ability to pay your debts in the future.”
He added that regardless of the number of credit pull requests are made, borrowers should check their scores for any inaccuracies or issues because “it takes a while” to sort them out.
Borrowers also have resources at their disposal to search for mortgage deals without instigating a credit pull at all. Once borrowers know their credit score, they can go on online lending exchanges such as Bankrate and LendingTree to acquire loan quotes. These lending exchanges do not request credit pulls.
“Our quotes are very precise — we’re pulling from the lenders’ real pricing systems,” says Douglas R. Lebda, founder and CEO of LendingTree. “You’re getting a real offer, so you shouldn’t have to apply with more than one on LendingTree.”
Lebda went on to caution eager borrowers obsessed with finding the perfect mortgage offer. Doing this is equivalent to “looking for the biggest liar” because from his experience, mortgage deals that sound too good to be true most likely are.
“How much do you trust the loan officer you’re dealing with?” he posits to would-be borrowers. “It pays to spend time interviewing the loan officer, rather than just concentrating on rates.”