Eugene Mortgage News

How do Credit Inquiries Impact your Score?

June 8th, 2018 10:43 AM by Mike Herborn

Credit inquiries have little to no impact on your score.  They are the least important factor in your credit score.  The 3 bureaus confirm that borrower scores will not drop when a mortgage lender pulls their credit more than once.  It’s only temporary drop and your score will be back up in 2-3 months.

The important concept is when someone is shopping for the best rates and applies with several mortgage lenders, they won't get "dinged" for multiple inquiries because the credit bureaus will lump them into an inquiry during that short period of rate shopping. Credit scoring models typically count mortgage, or auto loan, inquiries made over a short time period, such as 2 weeks, to be one credit inquiry for credit scoring purposes. 

Applying for multiple credit cards/loans in a short period of time will have more of an effect on your credit score.  Reason being, you will have the option to use all credit cards that were opened, then with the mortgage applications, you will only get an approved once.

Your credit score is made up of the following:  payment history makes up 40% of your score, while credit utilization is 20%. The length of your credit history contributes 21%, and a total amount of recently reported balances 11%. Finally, new credit accounts are responsible for 5%.

Soft inquiry: Checking your own credit report with the major credit bureaus will not lower your score.  If you apply for a job and they pull a credit report does not affect your score.

Hard inquiry: Applying for mortgage loans, credit cards, personal loans, auto loans are hard inquiries.

Credit inquiries do remain on your credit report for the last 2 years.

Posted in:General
Posted by Mike Herborn on June 8th, 2018 10:43 AM