Credit Inquiries Are A Formal Process
A "credit inquiry" is a formal request to review a person's credit report. Credit inquires are grouped with other traits into a credit-scoring category called "New Credit". New Credit represents a tiny 10 percent a person's complete credit score.
On the scale of 300-850, therefore, credit inquiries represent just a portion of complete category that accounts for a maximum of 85 FICO points. Mathematically, your credit score can't drop more than that.
Credit inquiries come in many flavors, but the bureaus isolate four types as being "a search for new credit".
Even then, though, the risk of default varies by credit type.
All things equal, credit card applications harm your credit score much more than an application for a home loan.
A Mortgage Inquiry Lowers Your FICO By 5 Points
As compared to the other credit scoring elements, Credit Inquiries is a relative nothing.
In the official FICO scoring model, Payment History and Credit Utilization account for 65% of a score, combined, and the amount of time during which you've had credit to your name accounts for 15%. These three areas are over-weighted because the bureaus are more concerned with what you've already done with your credit versus what you might do with more of it.
Your credit past is the best clue to your credit future.
It's one of two reasons why it's okay to give your social security number to as many lenders as you want. The impact of a credit inquiry is minuscule as compared to your history as a Model Credit Citizen.
Credit inquiries come in many flavors, but the bureaus isolate four types as being "a search for new credit".
- A credit check for a mortgage loan
- A credit check for an auto loan
- A credit check for a credit card application
- A credit check for a store credit card, or consumer loan
Even then, though, the risk of default varies by credit type.
All things equal, credit card applications harm your credit score much more than an application for a home loan.
A Mortgage Inquiry Lowers Your FICO By 5 Points
As compared to the other credit scoring elements, Credit Inquiries is a relative nothing.
In the official FICO scoring model, Payment History and Credit Utilization account for 65% of a score, combined, and the amount of time during which you've had credit to your name accounts for 15%. These three areas are over-weighted because the bureaus are more concerned with what you've already done with your credit versus what you might do with more of it.
Your credit past is the best clue to your credit future.
It's one of two reasons why it's okay to give your social security number to as many lenders as you want. The impact of a credit inquiry is minuscule as compared to your history as a Model Credit Citizen.
A mortgage credit inquiry is estimated to lower a credit score by just 5 points. Unfortunately, we'll never know for sure because the very act of examining the credit score causes it to move.
Shop Multiple Lenders, Take A Single "Ding" On Credit
The second reason you should shop around with lenders is that -- unlike applying for multiple credit cards -- applying for multiple mortgages won't ding you for multiple, consumer-initiated inquiries.
Talk to as many lenders as you want in a 14-day time frame; have your credit checked as often as you'd like; compare rates and fees. All of the inquiries will be lumped into a single application.
It's good for you and it's good for the bureaus. Your credit scores stay high and TransUnion, Equifax and Experian collect more fees from the banks.
Advice From The Credit Bureaus On Getting Low Rates
To promote rate shopping and to lessen The Fear of Credit Inquiry, the people behind the FICO brand spell out for you the best way to get the best mortgage rates possible:
Start Your Mortgage Rate Shopping With A Free Rate Quote
Your credit scores can mean the difference between a 4.25 percent and a 5.25 percent mortgage rate; a conforming mortgage and an FHA mortgage; an underwriting approval and an underwriting denial.
You can't evaluate your options without a formal credit check. Especially with loan-level pricing adjustments affecting everyone with less than 30% equity, regardless of credit score.
If you are curious and are thinking of starting the process, or have questions please email me or call me at 818-378-8669.
Shop Multiple Lenders, Take A Single "Ding" On Credit
The second reason you should shop around with lenders is that -- unlike applying for multiple credit cards -- applying for multiple mortgages won't ding you for multiple, consumer-initiated inquiries.
Talk to as many lenders as you want in a 14-day time frame; have your credit checked as often as you'd like; compare rates and fees. All of the inquiries will be lumped into a single application.
It's good for you and it's good for the bureaus. Your credit scores stay high and TransUnion, Equifax and Experian collect more fees from the banks.
Advice From The Credit Bureaus On Getting Low Rates
To promote rate shopping and to lessen The Fear of Credit Inquiry, the people behind the FICO brand spell out for you the best way to get the best mortgage rates possible:
- If you want the best rate, you should "shop around" for it
- Limit rate shopping to 14-day time span to keep your credit scores high
- Mortgage lenders need your FICO to give accurate rate quotes so give up your social security number
Start Your Mortgage Rate Shopping With A Free Rate Quote
Your credit scores can mean the difference between a 4.25 percent and a 5.25 percent mortgage rate; a conforming mortgage and an FHA mortgage; an underwriting approval and an underwriting denial.
You can't evaluate your options without a formal credit check. Especially with loan-level pricing adjustments affecting everyone with less than 30% equity, regardless of credit score.
If you are curious and are thinking of starting the process, or have questions please email me or call me at 818-378-8669.
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