Mortgage Credit Inquiry
We often hear a lot of enthusiasm from prospective homebuyers when it comes to discussing qualifying them for a dream home. That is until we inform them, we’ll need to pull their credit. Is this something homebuyers should truly be worried about? In reality, it’s not as a bad as it seems. Whenever you apply for a mortgage, the lender will typically perform a credit inquiry to assess your creditworthiness. This type of inquiry is called a hard inquiry, and it can have a temporary negative impact on your credit score. I personally wish they would have named it a Full Inquiry because a hard inquiry sounds so…hard!
When a lender performs a hard inquiry on your credit report, it signals to credit bureaus that you are actively seeking new credit. This can cause a slight dip in your credit score, typically by a few points. However, it’s not emphasized enough that the impact is usually small and temporary! Your credit score should rebound within a few months if you continue to make payments on time and maintain good credit habits.
If you recently had your credit pulled buy a mortgage lender and are afraid another one will tarnish your perfect credit, well boy do I have some good news for you! I always like to inform buyers that if you apply for multiple mortgages within a short period (usually 14-45 days), credit bureaus will treat these inquiries as a one single inquiry. We call this rate shopping, and it as the name suggests, it allows borrowers to compare loan offers without being penalized for multiple inquiries.
In summary, while mortgage credit inquiries can temporarily lower your credit score, it’s nothing to lose sleep over because the impact is usually minor and short-lived. If you’re concerned about credit score and how it will affect your mortgage qualifications, talk to one our mortgage experts about your options and how we help people understand how to achieve and maintain excellent credit every day.