Do Inquiries Hurt my Credit When Shopping for a Mortgage Lender?
4 Facts to Know About Your Credit by Marian Garcia-Stevens with United Mortgage NMLS #267152KS#0002436MO#12621-MLOCO#100503962WA#267152NMLS#239814CO#239814WA#-CL-239814KS#MC-0001462MO#15-1624
We all want to maximize are saving when it comes to everything. Especially when shopping for a new home or refinance. We deserve to have the lowest payment on our mortgage. Ok, this is how it’s done.
How is my score calculated?
Your score is derived from some special algorithms. Fico Scores are calculated from many different pieces of credit data in your credit report. Below is the 5 categories percentage chart determining how your score is calculated
This Is How Your Score Breaks Down:
35% -Payment History
30%-Amounts Owed
10%-New Credit
15%-Length Of Credit History
10%-Credit Mix
For some groups, the importance of these categories may vary. For example, people who have not been using credit long will be factored differently than those with a longer credit history.
Your scores consider both positive and negative information in your credit report. Late payments will lower your scores, however establishing or re-establishing a good track record of making payments on time will raise your score.
Basic Fico Scores range from 300-850, and industry specific scores range from 250-900. The higher the better.
How Do Inquiries Impact My Credit Score?
An inquiry is when a lender makes a request for your credit report or score. Inquiries remain on your credit for 2 years; however, Fico scores only consider inquiries from the last 12 months. Fico scores have been designed to count only those inquires that truly impact credit risk, as not all inquiries are related to credit risk. The impact will vary person to person based on their unique credit history. The credit inquires have a small impact on one’s score. For perspective, the full range scores are 300-850. Inquiries can have a greater impact if you have fewer accounts or a short credit history.
Does the Formula Treat All Credit Inquiries the Same?
No. Research shows scores are more predictive when they treat loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans fico scores ignore inquires made in the last 30 days prior to scoring. So, if you find a loan within 30 days, the inquires wont effect your score while rate shopping. In addition, fico scores look on your credit report for rate shopping inquires older than 30 days. If your fico score finds some, your scores will consider inquires that fall in a typical shopping period as just 1 inquiry. For fico scores calculated from the older versions from the scoring formula, this shopping period is any 14-day span. For fico scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the fico scoring formula it wants the credit reporting agency to use to calculate your fico scores.
What You Should Know About “Rate Shopping”
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, fico scores ignore mortgage, auto and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquires want effect your score while you are shopping. In addition, fico scores look on your credit report for more mortgage, auto, and student loan inquires older than 30 day. If your fico score finds some your score will consider inquires that fall in a typical shopping period as just 1 inquiry. For fico scores calculated from the older versions of the scoring formula, this shopping period is any 14-day span. For fico scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the fico scoring formula it wants the credit reporting agency to use to calculate your fico scores.
Marian Garcia-Stevens 