Mortgage Shopping and Credit Scores
The notion that a flurry of credit inquiries from mortgage lenders will lower a borrower’s score is a common misconception, experts say. The truth is that five inquiries are likely to have no more impact than one, provided they are made within a compressed period of time.
When it comes to mortgages, as well as automobile financing and student loans, “in both the FICO and VantageScore credit-scoring systems, there is logic in place that protects consumers’ credit scores from any negative impact caused by multiple inquiries as a result of rate shopping,” said John Ulzheimer, a credit expert with Credit Sesame, a website that helps consumers manage credit.
With FICO (the scoring model required by Fannie Mae and Freddie Mac), credit inquiries for mortgage loans that are less than 30 days old are ignored and have no impact, Mr. Ulzheimer said. Inquiries older than 30 days are looked at, but multiple inquiries from mortgage lenders made within 45 days of one another are treated as one inquiry. With VantageScore, the window is 14 days.
Both scoring systems assume that if someone has multiple mortgage-related inquiries in a short period, they are likely shopping for the best deal on a single mortgage, Mr. Ulzheimer said.
If one of the multiple mortgage inquiries occurs outside the allowed window — say, on day 46 — it would be counted as a second inquiry. “But it probably wouldn’t hurt you even then,” said Daniel Sater, the owner of Credit Scoring Advisor in Melville, N.Y. “One or two isn’t a significant risk factor in determining your ability to pay your debts in the future.”
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