Everything in life is becoming credit score driven - the higher the score, the better rates you are given for loans, insurance, et. If you are planning to buy a home, your lender will need to pull your scores to make sure you are qualified. Sometimes on bank owned properties, the bank also wants to pull credit scores if you make an offer on the property. How much is too much? Read the post below and comments for great info on credit scores.
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I hear "I Don't Want My Credit Pulled Because It Will Lower My Credit Scores!" on a fairly regular bases, when I tell a Borrower who is looking to be Pre-Approved for a mortgage that I need to run their credit in order to Pre-Approve them. The reason why a Borrower will give me this response is usually because of one of two reasons.
The first is because they have already talked to another Loan Originator who has told them to not let anyone else pull their credit, because it will lower their credit score. Generally the reason why a Loan Originator would tell a Borrower this is because they want to eliminate the competition, so they will scare the Borrower by telling them this.
The truth is that if two Loan Originators pull a Borrower's credit within 14 days of each other, it will only count as 1 credit pull, and have absolutely no impact on the Borrowers credit score. In fact the Borrower's credit can be pulled several times within that 14 day period, and it will only count as one credit pull. Could the Borrower see a change in their credit score from one pull to the other? Absolutely, but it will not be as a result of the credit pull, it will be because a Creditor has reported to the Credit Bureaus in between credit pulls. Having said this a Loan Originator maybe correct in advising a Borrower to not have their pulled if the Borrower is boarder line on being able to qualify for a mortgage. But the Loan Originator should clearly explain why, and that the Borrower has the 14 day window to talk to competitors.
The second reason why I get the response "I Don't Want My Credit Pulled Because It Will Lower My Credit Scores!" is because the Borrower knows that their credit is not good, and wants to see if they can get a Loan Originator to give them a Pre-Approval with out pulling their credit. To do so is silly on the part of the Borrower and Loan Originator. If the Borrower makes an offer on a property, and it is accepted, the Borrower's credit will have to be pulled in order to submit a loan, and everything will fall apart at that point. By the way Borrowers who don't want to have their credit pull for this reason will ALWAYS tell me that they have great credit.
If a Borrower does not let me pull their credit our conversation is a very short one. I will not consider even giving a Borrower a Pre-Qualification Letter based on looking at their credit later. If a Borrower does not let me pull their credit, they are wasting my time, their time, and the Realtors time.
There are two things that are an ABSOLUTE MUST when Pre-Approving a Borrower:
- Running a Borrowers Credit Report, which will show their credit scores, and monthly revolving debt.
- Looking at a Borrowers Income, so that Debt-To-Income Ratios can be establish early on the Pre-Approval process.
These two things are an ABSOLUTE MUST, anything short of this early on in the process is a waste of everyone's time.
Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org