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What Happens When A Mortgage Company Accpets Your Credit Score

    Many mortgage lenders, including those who make loans that meet the requirements of Fannie and Freddie, use a classic FICO credit score, with scores between 300 and 850. For most common credit decisions, like personal loans and credit cards, lenders use your FICO score. If you are applying for a mortgage with another person, like your spouse or partner, the two, four, and five FICO scores for the applicants are taken.

    Mortgage lenders pull your FICO scores from all three bureaus, but use just one in making final decisions, according to Darrin Q. English, a senior community development loan officer with Quontic Bank. Both scores are probably accurate, but lenders use a specialized one calculated differently depending on the loan type. It is also possible that the scores that your lender uses are based on all three of your credit reports. If your score that you are pulling is based on one credit report, but your lender is using the other, then the difference is because there is some data discrepancy between the two reports.

    The score that the lenders are pulling may differ from the score you used at times by a few points, perhaps enough to get you denied for a better interest rate, or perhaps enough for the application to be rejected. Use the score to assess your overall credit score, and remember that lenders take into account other factors beyond just your credit. While using means that you are not going to see exactly what a lender is seeing, it is generally a good idea to look at both your credit report and your credit score to assess your likelihood of being approved, or whether you need to work more on your credit before applying.

    A credit check for your mortgage application may affect your score if you direct a prospective lender to run a full, hard credit check on your file. Having your credit checked during your mortgage application process will have only a minor impact–usually less than five points–and should not affect your ability to qualify for a home loan. Getting preapproved for a home loan, while simultaneously applying for other types of credit, will have virtually no impact on your score. If you have not applied for a lot of credit recently, the mortgage application is likely to have a minimal impact on your score.

    Yes, a hard inquiry is recorded in your credit file when you apply for credit, like getting an offer on a mortgage. Keep in mind, a hard inquiry means that you are looking for more credit. Because a new hard inquiry indicates to lenders and the credit scoring models that you might open new accounts or take on new debts that are not already showing up on your credit report, it may temporarily lower your credit score, but any effect is typically minor.

    If you let more than one mortgage lender run an inquiry against your credit reports in a certain time frame, those inquiries are all treated as one. Within the 45-day window, multiple credit checks by mortgage lenders are recorded as one single inquiry in your credit report. Then, any inquiries that are tagged by a mortgage lender and made within the 45-day window are considered as one inquiry on your credit score. For example, if you shopped around for mortgage rates from four lenders over the course of 30 days, credit agencies count all those mortgage inquiries as a single inquiry.

    According to FICO, you can have as many mortgage pre-approvals and interest rate quotes in as many days as you want–they will all be considered as one, non-repeatable inquiry as long as you are applying for the same kind of loan.

    Because you likely will not know which scoring models any given lender is going to be using right now, or when you are applying for credit in the future, hold off on applying for various mortgages for 14 days just to be sure. The good news is if you are shopping with multiple lenders, the credit bureaus typically will only take one hit to your score in 45 days, regardless of how many mortgage lenders are doing hard credit checks. Waiting until you are ready to purchase in order to compare mortgages with different lenders does not affect your credit score by doing a hard credit inquiry, nor does it trigger your 45-day window for mortgage shopping too soon. By the time the request from the individual mortgage lender shows up on your credit report, you will have hopefully chosen the offer of a mortgage you are going to take.

    Applying for credit cards, auto loans, or other types of loans will also trigger an inquiry, which could hurt your score, so try to avoid applying for those other types of credit just before getting your mortgage, or at any point in the mortgage process. Lenders pull credit just prior to closing to make sure that you did not take on new credit card debt, car loans, or anything else. Also, if there are new credit inquiries, we need to confirm what new debt, if any, came out of that inquiry. To get access to your credit scores, lenders will have to run an inquiry, sometimes called a pull, at one of the three main credit bureaus – Equifax, TransUnion, and Experian. The three main credit bureaus are Equifax, TransUnion, and Experian. A mortgage soft credit check is a preliminary look at your credit score; the lender may see basic bits of information about you they need to decide, but it does not necessarily get into everything stored on your report.

    Lenders then assess your credit score, as well as other financial information such as your debt-to-income ratio, to generate a customized mortgage quote. If one of your co-borrowers has a lower credit score, lenders generally use that borrowers lower rating to determine whether you qualify for a mortgage, as well as which rates and terms you should offer. Then, lenders use the higher score as the benchmark for offering rates and terms for each borrower. Many lenders have a minimum score threshold that you must meet before you are accepted on an application (ours is 620), but borrowers who fall somewhere between 620 and the ideal 850 score can see wildly different rates and terms because of their scores and histories.

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