An interest rate that an applicant qualifies for on a mortgage loan is often determined by their credit score. And the scoring model most lenders use was created by the Fair Isaac Corp. where the term "FICO" score came from.
TRUE or FALSE? The more credit pulls/inquires an applicant has, the worse their credit scores get.
According to Fair Isaac:
- The credit-scoring model recognizes that many consumers shop around for the best interest rates before buying a car or home and that their searching may cause multiple lenders to request their credit report. To compensate for this, multiple auto or mortgage inquiries in any 45-day period are counted as one inquiry.
- The FICO score ignores all mortgage and auto inquiries made in the 30 days before scoring. If you find a loan within 30 days, the inquiries won't affect your score while you're rate-shopping.
So where did the rumour come from that additional credit inquiries will hurt your score? Most likely from the Loan Officers who fear that you will continue to shop around after they quoted you! But if the Loan Officer is sincerely looking out for the applicant's best interest, and/or they are someone that was referred by a Realtor who has had experience with them, then be comfortable knowing that you probably got a fair quote... we don't get referrals for high rates and high points! If a Loan Officer insists that you don't shop around, then maybe get a second opinion as to why or do a little research on that LO/their company.
If you do shop, do just a few inquiries within a short period of time. Inquiring every month can affect you. Also try to avoid any major purchases prior to getting qualified. If the difference between getting the higher or lower rate is a matter of a few points, then every move you make is important.
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