Will Shopping around for a mortgage hurt my credit score?
Borrowers need not avoid shopping around for the best mortgage deal out of fear that allowing multiple lenders to “pull,” or check, their credit will chip away at their score! The notion that a flurry of credit inquiries from 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 home loans, 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 home 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 lenders made within 45 days of one another are treated as one inquiry. With VantageScore, the window is 14 days.