Financing in Outer Sunset>Question Details

Jennifer, Home Buyer in San Mateo County, CA

Does going through the pre-approval process with multiple lenders hurt my credit score?

Asked by Jennifer, San Mateo County, CA Mon Jul 21, 2008

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Sylvia Barry, MAS,CIPS,SRES’s answer
Yes, Kathy, it does, especially if you are pulling multiple credit reports. When you are shopping, the advise (from the mortgage brokers) is that you might want to pull it once and have copies available for other lenders so that the process will not adversely affect your credit. By how many points, I can not tell you but each point counts when you try to get best rates.

Sylvia
2 votes Thank Flag Link Mon Jul 21, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA
MVP'08
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Correct answer from Fair-Issac, the company that develops credit scoring models for the three major credit bureaus:

What to know about "rate shopping."
Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though youre only looking for one loan. To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for auto or mortgage inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

Reference below:
2 votes Thank Flag Link Tue Jul 22, 2008
Good advice and a very good question. The best solution is to work with a mortgage broker that will pull it once and then get a copy to the bank you already do business with to see if they want your business. So it will be pulled once and you can shop it for a good rate.
The cost of money is the cost of money. It really does cost all lenders about same so the differences come from fees, points, spread and such.
1 vote Thank Flag Link Tue Jul 22, 2008
Jed Lane, Real Estate Pro in San Francisco, CA
MVP'08
Contact
You should definitely be pre-approved. As long as your credit is not pulled repeatedly, the pre-approval process should not hurt your credit. No lender will give you a full approval without pulling your credit himself. However, while you are shopping for the perfect lender, have one pull a full credit report from all three credit agencies. Get your FICO score, then ask for a copy of it. You will then have all the information on your credit a lender needs to get started in the pre-approval process. Be sure to ask each lender to give you mortage options. Often there will be several programs that may work for you. A good lender should offer you options explaining the pros and cons of each. Your decision should be based on short and long term goals and your own comfort level. Remember most lenders have access to the same or similar programs. Please be careful of searching for a loan on-line. Some sites that offer to shop for you actually let each lender pull your credit individually. That can damage your credit if the shopping goes on longer than 30 days. Ask your Realtor for a few recommendations for lenders. They work with lenders that do what they said they could do, have good communication, and treat their clients well.
Good luck!
1 vote Thank Flag Link Mon Jul 21, 2008
you can have your credit safely pulled a few times within 30 days. Why do you feel need to shop so much? When it comes down to it, most lenders are about the same.
1 vote Thank Flag Link Mon Jul 21, 2008
It shouldn't, you have a 30 day window from your first pull to look for a loan without penalty to your credit score.
1 vote Thank Flag Link Mon Jul 21, 2008
Kathy,

Only if they run your credit reports for each application. I agree with Sylvia to either get copies or bring your own report to the meeting. Make sure to get the combo report that provides information from all three main reporting agencies. It does not "ding" your credit for you to get a report for yourself.

Here are two great resources for credit scores:
http://ezinearticles.com/?10-Unexpected-Things-That-Lower-Yo…
http://www.privacyrights.org/fs/fs6c-CreditScores.htm

CJ
Web Reference: http://www.TalkToCJ.com
1 vote Thank Flag Link Mon Jul 21, 2008
Hi Kathy,
I see that you are getting a number of answers on your question. The truth is (according to Fair Issac) it does not hurt your credit to have it pulled by multilple (mortgage) lenders. It does hurt your score if you run multiple requests in search of credit card debt. As most lenders (brokers) have the same programs, I would suggest that fairness alone is the reason why I would request that you limit applying all over town. Calling and asking for their current rate is very fair, but asking each of them to approve you just adds to their overhead and increases their costs. In this credit environment we in the mortgage business are feeling the pinch big time and appreciate not getting our hopes up. Regards, Russ Glines
Web Reference: http://russglines.com
0 votes Thank Flag Link Thu Aug 7, 2008
Yes,without any questions at all...Every time you have an inquiry on your credit it does lower your score.If you really want to find out the true answer,ask your banker,or mortgage professional
0 votes Thank Flag Link Tue Jul 22, 2008
If you have up to 3 lenders pull your credit report within a 30 day period, such shouldn't lower your scores.

One advantage of a mortgage broker is that we pull one credit report and can use it with multiple lenders. We do the shopping for you and that safeguards your credit scores.

Please remember that if you open a new bank account , cell phone account or apply for insurance that typically triggers a credit report.

If you are shopping for a home loan, try not to apply for any other credit during the same period.

Also, keep in mind that if you are applying to multiple sources for a home loan, the company that ends up giving you the loan is going to want an explanation letter of why you have applied for the other loans. This is no big deal, just a heads up so you aren't surprised by the request for an explanation letter.
Web Reference: http://www.natashalovas.com
0 votes Thank Flag Link Tue Jul 22, 2008
Actually you can have up to 6 "mortgage" inquiries in a 14 day period on your credit report and it only counts as 1 inquiry. 1 inquiry should not have a significant impact on your credit. However, the mortgage industry has implemented "risk based pricing" which means that someone with a credit score 680, for example. Thus you need to be aware of this. If you are shopping around with various lenders, just make sure you do it in a short time period to minimize the impact.
0 votes Thank Flag Link Mon Jul 21, 2008
Kathy,

That is a good question. I've heard different things on both sides and still do not know the absolute answer after being in the biz for 5 years. I hear every inquiry dings you, and I have also heard there is a 30 day window for consumers to shop for mortgages, as long as its only mortgage people inquiring. I still don't know, credit scoring is very complicated, alot of things go wrong people have false accounts, stolen identity, unknown accounts, etc. If your very borderline on getting a loan I would be concerned about it. However, if it's only going to ding your credit for a short perios of time and your credit is flawless, I wouldnt sweat the load at all- inquires are not the primary reasoning for bad credit- debt and missed payments are.

Therefore I think your fine and I also agree with mcbrown....I don't know why you need to shop so much or why the broker is sending your package out to multiple lenders. Everybody has the same products nowadays. Customer Service is what top originators across the country are providing- not products that nobody knows about (There arn't any in existence). Those days are long gone. I work at a bank and do not know one single broker that has acess to something I dont. Good luck with everything and Best wishes!

Brent Bester
Mortgage Professional
614-622-8916
0 votes Thank Flag Link Mon Jul 21, 2008
GREAT QUESTION: Welcome to Trulia
Yes each time your credit is pulled it will low your scores, once you have your scores state you want to "talk shop" with the lender NOT pull the credit scores. Credit inquiries can cost you approx 5 - 10 pts.
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Mon Jul 21, 2008
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