How Many Times Can You Pull Credit for a Mortgage?
Understand how mortgage credit inquiries impact your score. Learn the rules for multiple pulls and manage your credit effectively during home loan applications.
Understanding how credit inquiries affect one’s financial standing is a common concern for prospective homebuyers. Gaining clarity can help individuals confidently approach home financing.
Understanding Credit Inquiries
A credit inquiry occurs when a lender or other entity requests to view an individual’s credit report. There are two primary types of these inquiries: soft inquiries and hard inquiries. Understanding the distinction between them is important because they have different implications for a credit score.
Soft inquiries happen when someone checks their own credit report or when a company pre-approves an individual for an offer. These inquiries do not affect a credit score and are not visible to lenders. Examples include checking your own score or receiving pre-approved credit card offers.
In contrast, hard inquiries occur when a lender formally requests a credit report as part of a credit application, such as for a mortgage, auto loan, or credit card. Hard inquiries can cause a small, temporary dip in a credit score, typically by less than five points. While hard inquiries generally remain on a credit report for up to two years, they usually only influence credit scores for about 12 months.
Mortgage-Specific Credit Pull Rules
When applying for a mortgage, multiple hard inquiries from different lenders are often necessary to compare loan terms and interest rates. Credit scoring models, such as FICO and VantageScore, are designed to accommodate this by incorporating special rules to minimize the impact of these inquiries on a credit score.
This accommodation is known as a “rate shopping window.” Within this timeframe, multiple inquiries for the same type of loan, like a mortgage, are treated as a single inquiry for scoring purposes. This means the effect on a credit score can be the same whether a consumer applies with one mortgage lender or several, provided all inquiries occur within the defined window.
The length of this rate shopping window varies by credit scoring model. Newer FICO scores typically offer a 45-day window for mortgage rate shopping, while older FICO and VantageScore models generally use a shorter 14-day window. This special treatment applies specifically to shopping for the same type of loan, such as all mortgage inquiries, and not for different types of credit like a mortgage and a credit card simultaneously.
Managing Credit During Mortgage Application
Careful credit management during the mortgage application process helps maintain a healthy credit score. Obtaining a mortgage pre-approval is one effective strategy. While a full pre-approval typically involves a hard inquiry, causing a minor and temporary score reduction, it provides a clear understanding of the loan amount an individual might qualify for. Some lenders may offer a preliminary pre-approval based on a soft inquiry, which does not affect the score.
To minimize credit score impact, conduct all mortgage rate shopping within the designated rate shopping window. This ensures multiple inquiries from various lenders are grouped and treated as a single event by credit scoring models. Completing all applications within this period, typically 14 to 45 days depending on the scoring model, allows individuals to compare offers without incurring multiple distinct hits to their credit score.
Before applying, understand your current credit score and review credit reports for accuracy. Consumers are entitled to a free annual credit report from each of the three major credit bureaus. Addressing inaccuracies or errors before lenders perform hard inquiries can contribute to a more favorable credit assessment. Additionally, avoid applying for other new forms of credit, like credit cards or car loans, during the mortgage application period.