How Long Can You Shop for a Mortgage Without Hurting Credit?
Balance finding the best mortgage rates with protecting your credit. Learn smart strategies for comparing lenders effectively.
When seeking a mortgage, many individuals consider how applications might affect their credit score. Securing a favorable mortgage rate is important, as is safeguarding one’s credit standing. Understanding credit checks helps in navigating the home buying journey effectively, allowing prospective homeowners to pursue competitive rates while being mindful of their financial profile.
Understanding Credit Inquiries
When a lender accesses your credit report, it results in a credit inquiry, which can be either “hard” or “soft.” A hard inquiry occurs when a lender reviews your credit report as part of a formal application for new credit, such as a mortgage, auto loan, or personal loan. These inquiries appear on your credit report and can temporarily cause a minor decrease in your credit score. While a hard inquiry can remain on your credit report for up to two years, its impact typically lessens after one year.
Soft inquiries do not affect your credit score. These occur when you check your own credit report, or when a lender pre-qualifies you for an offer without a formal application. Promotional offers or employment verifications can also trigger soft inquiries. Unlike hard inquiries, soft inquiries are often only visible to you.
The Mortgage Shopping Period
Credit scoring models recognize that consumers shop around for the best mortgage rates. To accommodate this, multiple hard inquiries for mortgage applications within a specific timeframe are generally treated as a single inquiry for scoring purposes. This “rate shopping window” encourages consumers to compare offers without undue credit score penalties.
The typical duration of this window varies by credit scoring model. Current FICO Score versions generally allow a 45-day period for mortgage rate shopping. However, some older FICO models, which lenders may still use, operate with a 14-day window. VantageScore typically uses a 14-day window. To minimize credit score impact, complete all mortgage applications within a 14-day period to ensure inquiries are grouped as one, regardless of the scoring model used.
Strategic Mortgage Shopping
Effectively shopping for a mortgage involves strategic steps to minimize credit impact. Obtaining a pre-approval provides a thorough assessment of your financial standing and often involves a hard credit check. This differs from pre-qualification, a less formal estimate based on self-reported information that usually involves a soft inquiry. A pre-approval letter demonstrates to sellers that you are a serious and verified buyer, advantageous in competitive housing markets.
To ensure multiple mortgage inquiries are treated as a single event, submit all applications to desired lenders within the defined shopping window, ideally within 14 days. Having necessary financial documents prepared in advance, such as tax returns, pay stubs, and bank statements, can expedite the application process. This preparedness helps avoid delays that could push inquiries outside the advantageous timeframe. During this period, avoid applying for other types of credit, such as new credit cards or car loans. Such additional applications can result in separate hard inquiries that may further impact your credit score.
Monitoring Your Credit During the Process
Throughout the mortgage shopping and application process, regularly checking your credit report is beneficial. You are legally entitled to a free copy of your credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—every 12 months through AnnualCreditReport.com. You can also access these reports weekly for free. Reviewing your reports allows you to confirm that inquiries are correctly recorded and that no unexpected or erroneous entries exist.
When reviewing your credit report, pay close attention to personal information, listed accounts, and payment history to ensure accuracy. Unauthorized inquiries or accounts you do not recognize could indicate errors or potential identity theft. If you find discrepancies, dispute them promptly with both the credit bureau and the information provider. Maintaining vigilance over your credit report helps ensure your financial profile accurately reflects your creditworthiness as you pursue a mortgage.