How Much Do Inquiries Hurt My Score?

Credit inquiries can but do not always hurt your credit score to the extent it influences your mortgage qualification significantly.

It is no secret that credit inquiries have an effect on your credit score.  This is a fact.  Inquiries can hurt your score.  Things you may wonder regarding your score dropping:

1. Can an inquiry hurt your score enough to the extent it would keep you from qualifying for a mortgage to buy a home?
2. …that it may limit your mortgage options, leaving you with a program that is less financially efficient than you prefer?
3. …that it may affect the interest rate on the loan you do qualify for?
4. …that it may force you to bring more money to closing for down payment?

All of the above is true, TO SOME EXTENT, but it may or may not be necessary, where your score currently sets, to worry about it though.

Understanding Credit Scoring Models In Relation to Bureaus

First, it is important that you know, there are multiple scoring models out there that calculate your credit score differently.  Furthermore, it is even more important that you understand that Equifax, Trans Union, and Experian are not responsible for calculating your score.  Those bureaus have their own scoring model, so they CAN come up with a score for you, but the bureaus for the most part are like a “warehouse” holding all of your consumer credit history.  The different models that mortgage companies use, or credit cards, or even car loan companies use, those scoring models pull your information from the “warehouse” of credit history that the bureaus hold, and that model uses its own system to evaluate that information to calculate a score.  In the end, this is why you will see a different credit score depending on where your credit is pulled from.  Now that you understand that, let’s get to the myths and facts about all this.  A good place to keep an eye on your credit is Credit Karma.

How much does multiple credit pulls hurt my score?

In my research, my sources tell me that you have 14-45 days, depending on the scoring model used, to have multiple mortgage credit inquiries without the multiple inquires hurting your credit.  The models are designed to understand that people may be shopping different mortgage lenders to get the right deal, and they do not want to penalize you for that.  Moral there is, do your mortgage shopping all at once so the multiple inquiries does not hurt your score.  Rates change on a daily basis, so it does not make sense to shop mortgage companies against each other, days, weeks, or certainly months apart…that would be counter intuitive and waste of your energy anyway.  The big question is, how much can credit inquiries change your credit score, right?  The hit for inquiries can be as little as 4 points, and as much as 12 points, depending on how much credit you have.  For example, if you have one credit card you opened 2 years ago with a perfect history, and one car loan you opened 6 months ago with a perfect history, and that is it, multiple credit inquiries might hurt your score closer to 12 or more points. Whereas, if you had 8 current active lines of credit, and say 4 of them have been around for 10+ years, and you have 10 other closed/inactive lines of credit with perfect history from years ago, now you may only see your score drop 4 points with multiple credit pulls.  If you have credit inquiries from different industries, it is likely to hurt your score regardless of how far apart they are.  For example, you get a credit card inquiry, and then the next day a car loan inquiry, and then 2 weeks later you get a mortgage inquiry…your score will suffer the consequences.

Myth or Fact?

I want to keep it short here, so I’ll be brief, but if you still have questions after reading this post, feel free to call my cell at 469-450-2723.  If you have marginal credit and need guidance, I have a friend that has helped many clients of mine to get their scores up…he has probably gotten 25+ derogatory lines of credit, just in the last year, settled for less, deleted, or updated.

Yes, even a 4 point drop in your credit score can have negative effect on your mortgage options.  If you have credit scores 740+ and definitely 750+, more than likely too many inquiries will not influence your application or benefits in a mortgage.  Between the wide variety of mortgage programs, there are quite a few where the interest rate is directly related to the credit score.  For example, a mortgage program might offer you a slightly better interest rate at 700 and up, and if your score were to drop under 700, your interest rate might be a tad higher.  So, if you have a 701 middle credit score, and your inquiries dropped your score 4 points, you would have a negative consequence.  This being said, to some it all up, if you are looking to buy a home in the near future, put off applying for other lines of credit like credit cards, school loans, car loans, and so forth, and once you have closed on your new home, then proceed applying for other credit if you need to.