Does Getting a Mortgage Quote Hurt Your Credit?

Credit scores are a fundamental aspect of personal finance, significantly influencing an individual’s ability to secure loans, credit cards, and even housing. These three-digit numbers, ranging from 300 to 850, provide lenders with an assessment of creditworthiness, indicating the likelihood of timely debt repayment. When considering a substantial financial commitment like a mortgage, a common concern arises regarding how obtaining multiple quotes might impact one’s credit score. This article clarifies the intricacies of credit inquiries and their effect on mortgage shopping.

Understanding Credit Inquiries

A credit inquiry occurs when a party requests to review an individual’s credit report. These inquiries are broadly categorized into two types: soft inquiries and hard inquiries.

Soft inquiries, also known as soft pulls or soft checks, do not affect a credit score. These occur when an individual checks their own credit score or report, or when a company performs a background check, such as for pre-approved credit offers or employment verification. While soft inquiries may appear on a credit report, they are only visible to the consumer and do not influence credit scoring models.

In contrast, hard inquiries happen when a lender reviews a credit report as part of a formal application for new credit, such as a loan or credit card. These inquiries signal to credit scoring models that a consumer is seeking additional credit, which can be perceived as an increased risk. A single hard inquiry results in a small, temporary decrease of a few points on a credit score. Hard inquiries can remain on a credit report for up to two years, though their impact on the score diminishes over time, ceasing after 12 months.

How Mortgage Inquiries are Treated

Credit scoring models recognize that consumers shop around for the most favorable mortgage rates. To avoid penalizing individuals, these models incorporate special rules for multiple inquiries related to mortgages, auto loans, and student loans. This special treatment is known as a “rate shopping window” or “deduplication period.”

Within this defined window, multiple hard inquiries for the same purpose, such as a mortgage, are counted as a single hard inquiry for scoring purposes. The length of this window can vary by credit scoring model, generally ranging from 14 to 45 days. This means that if an individual applies for multiple mortgage quotes within this period, all those inquiries will be treated as one for credit scoring calculations, minimizing the impact on their score.

While a hard inquiry will still be recorded on the credit report, the grouping mechanism ensures that comparing offers does not depress the credit score. This specific treatment applies only to certain types of installment loans like mortgages, auto, and student loans. Other types of credit applications, such as for credit cards, do not receive this same grouping benefit and may result in separate hard inquiries.

Strategies for Shopping for a Mortgage

To minimize potential credit score impact when shopping for a mortgage, concentrate all applications within a short timeframe, ideally within a 14-day window. This ensures that multiple inquiries are grouped as a single event by credit scoring models, leveraging the rate shopping period.

Before initiating the mortgage shopping process, prepare all necessary financial documents. This includes:

• Recent bank statements
• Pay stubs
• Tax returns
• W-2s

Having these documents readily available can expedite the application process, helping to keep all inquiries within the favorable shopping window. Checking one’s own credit report and score prior to applying for a mortgage is also recommended. This self-check is a soft inquiry and does not affect the credit score, allowing for the identification and correction of any errors.

During the period of mortgage shopping, avoid applying for other new credit. Seeking new credit cards, car loans, or personal loans can result in additional hard inquiries that are not grouped with mortgage inquiries, causing distinct score reductions. Maintaining existing credit accounts responsibly by making on-time payments and keeping credit utilization low can also help preserve a strong credit profile throughout the mortgage application process.