credit inquiries

The Myth of Multiple Mortgage Credit Inquiries

posted in: Mortgages

The all-important credit score is a number with significant power over your life. It can determine whether or not you can afford a new car or even a home.

It is hard to understand exactly what brings your credit score down. So whether you are one of the 1 in 3 Americans who have bad credit, or simply hovering on the brink, you may be terrified of unwittingly bringing down your score even more.

For example, you may be afraid to comparison shop for your mortgage because you have heard that credit inquiries can bring your score down. By not finding the best deal, you could end up spending thousands of dollars more over the life of your loan.

Let’s look at how credit inquiries work so you can comparison shop without stressing about your score.

Two Types of Credit Inquiries

First of all, let’s note that there are two overarching types of credit inquiries: soft and hard.

A soft inquiry does not affect your score at all. This type of inquiry happens when someone is doing a background check on you. Sometimes you will notice that lending companies for smaller personal loans will tout a preliminary “soft” inquiry to find out how much you qualify to apply for.

However, once you are ready to apply for a loan or get pre-approved for a mortgage, the company will make a hard inquiry. They will ask your permission to do this, and this type of inquiry does affect your score.

Credit Types

The important thing to realize is that the credit bureaus do not treat inquiries for all types of credit the same way.

For example, credit cards are a type of revolving credit. You can pay them down, but it is also very easy to rack them up again. A mortgage, on the other hand, will constantly be paid down.

Thus, the credit bureaus view credit cards as a more volatile type of credit. Due to this, a hard inquiry for a credit card will impact your score more than the same inquiry for a mortgage.

Additionally, applying for a bunch of credit cards is seen as risky behavior and will affect your score even more. This type of scenario is how the myth about multiple mortgage credit inquiries got started.

Consolidate Multiple Inquiries Into One

Now that you understand these two things, mortgage inquiries do affect your score, but they do not affect it very much. Regardless, when it comes to your credit score, you want to keep it as high as possible. Even just a few points here and there can add up quickly in either the positive or the negative.

However, the credit bureaus understand your desire to shop around for a mortgage. Thus, they have established this very important policy that dashes the multiple mortgage credit inquiry myth for good. As long as you make all your inquiries within a certain time window (usually 30-45 days), they count as one inquiry.

Boom. That is how you shop around without destroying your credit score.

It’s Time to Start Shopping

Now that you understand how mortgage credit inquiries work, it’s time to start shopping for the perfect mortgage for you. Feel free to contact us today to find out what you qualify for!

7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Virginia, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.