When you're in the process of buying a home or refinancing your mortgage, it's common to wonder whether having a lender run your credit will negatively impact your credit score. After all, your credit score is a key factor in determining your eligibility for the best interest rates. Let’s explore how credit inquiries work in the context of mortgage applications and whether multiple credit checks could harm your score.

Understanding Credit Inquiries

There are two main types of credit inquiries: soft inquiries and hard inquiries.

1. Soft Inquiries: These checks occur when you or a lender performs a review of your credit, but it’s not associated with a new credit application. Soft pulls don’t impact your credit score.

2. Hard Inquiries: When you apply for a new line of credit—such as a mortgage, auto loan, or credit card—the lender performs a hard inquiry. This type of inquiry is recorded on your credit report and may affect your credit score slightly.

How Hard Inquiries Affect Your Credit Score

In general, a single hard inquiry for a mortgage can lower your credit score by a few points—usually between 5 and 10 points. However, the impact tends to be minimal and short-lived, especially if you have a solid credit history. Importantly, mortgage-related inquiries are treated differently than inquiries for other types of credit.

Multiple Credit Inquiries While Mortgage Shopping

According to FICO, credit scoring models recognize that consumers often shop around for the best mortgage rates. As a result, multiple credit inquiries from mortgage lenders within a specified timeframe are treated as a single inquiry, minimizing the effect on your credit score. This is called the rate shopping window.

• FICO's Rate Shopping Window: For most FICO scores, the window is 45 days. Any mortgage-related hard inquiries made within this period are considered one inquiry for scoring purposes.

• VantageScore's Window: VantageScore, another widely used credit scoring model, has a shorter window of 14 days.

Key Takeaways on Mortgage Credit Inquiries

• Minimal Impact: A single inquiry may lower your score by a few points, but it won’t significantly hurt your credit.

• Good Credit Management Matters: If you have good credit habits—such as paying bills on time and keeping credit utilization low—your score is likely to recover quickly, even after multiple inquiries.

Final Advice: Don’t Fear the Credit Check

It’s important to know that credit inquiries are just one small part of your overall credit profile. If you’re serious about purchasing a home, don’t let the fear of a small dip in your credit score prevent you from shopping around for the best mortgage terms. Remember, a slightly higher credit score could save you thousands of dollars over the life of your loan by qualifying you for a lower interest rate.

If you're ready to start your mortgage journey or have questions about how credit impacts your loan, feel free to reach out. As a licensed Mortgage Loan Officer, I’m here to guide you every step of the way!