How to shop for a mortgage without hurting your credit score

You’ve finally found the perfect home and you’re ready to shop for a mortgage. If you want…

You’ve finally found the perfect home and you’re ready to shop for a mortgage. If you want to make sure you shop around for a mortgage without hurting your credit score, there’s a simple strategy you can use to limit the impact.

Here’s why comparing rates can lower your credit score: Every time you apply for a home loan, a mortgage lender does a thorough review of your credit report. This action is called an in-depth investigation and may impact your score.

[Read: Best FHA Loans.]

Types of credit applications

There are two types of credit applications.

Hard inquiry, or hard pull: A serious investigation occurs when a creditor thoroughly examines your credit report after you apply for credit. A serious investigation can hurt your credit score and you could lose between zero and five points. Getting pre-approved for a mortgage or applying for a credit card are examples of difficult requests.

Soft inquiry or soft pull: An informal inquiry is more of a quick look at your credit report, and it’s used for specific purposes, such as pre-qualifying for a mortgage. Another example is when a credit card issuer reviews your report to see if you might qualify for a credit card offer. When you review your own report, this is also an example of a soft inquiry. Informal inquiries do not affect your credit score.

When a lender asks your report for more content – a hard credit request – each request has the potential to reduce your credit score by zero to five points. Note that it is each when you apply. Since a few points on your credit score can mean the difference between getting the lowest interest rate or the next lowest rate, you need to be careful with the timing.

For mortgage applications, most lenders will request your report from the three major credit bureaus: Equifax, TransUnion and Experian. So it’s a good idea to check your own credit reports before applying for a mortgage. You want to make sure they are accurate and free of any errors that could lower your score.

[Read: Best Mortgage Lenders.]

Check your credit report

You want to inspect your reports for errors or signs of fraud. Here are some common errors in credit reports, according to the Consumer Financial Protection Bureau:

Personal information. Check for identity errors, such as a wrong name, address or phone number; accounts with owners with the same name; and incorrect accounts resulting from identity theft.

Account status. This could include closed accounts flagged as open, accounts erroneously labeled as overdue, or debts that erroneously appear more than once.

Data management. Look for false information that reappears on a report after correcting it or accounts that appear multiple times and list different creditors.

Account balances. Review your reports for incorrect balances or credit limits. Keep in mind that there may be timing issues when reviewing your credit file balances. When payment history is reported to the bureaus, it is not updated instantly. There is a delay to verify new information before the data is updated on your report.

Although federal law entitles you to one free copy of each credit file every 12 months, you can access your credit reports weekly now. The three credit bureaus have expanded access to credit reports through December 2022.

[Read: Best Mortgage Refinance Lenders.]

How to prequalify for a mortgage

You can contact a lender and request prequalification before you begin your home search. This step can save you from wasting your time on houses that you cannot qualify for. Sometimes it’s just a conversation you have with the lender, or it can be an informal request if the lender looks at your credit report.

A prequalification tells a potential seller that you seem qualified to apply for a mortgage at a certain loan amount. You will often receive a letter stating this which you can show to your agent or the seller. But that doesn’t mean you’d be absolutely approved for the loan, because there might be something in your credit report or finances that might come up upon further investigation.

If you are sure you can afford and get approved for a certain loan amount, you can skip pre-qualification and go straight to pre-approval. Only take this step if you are seriously considering buying a home soon. Getting pre-approved means the lender will do a thorough analysis of your credit report and finances. This results in a difficult investigation, which can impact your score.

Mortgage credit window

While getting pre-approved is tough asking, you can get as many mortgage rate quotes as you want with minimal damage to your credit score if you do so within 14 days. This is often referred to as the “mortgage extraction window”.

Credit checks from lenders in this window will count as a single inquiry on your credit report by the FICO score algorithm. With FICO scores, you actually have a 45-day window for rate purchases, but some older FICO scores limit it to 14 days. Similarly, VantageScore only allows a two-week period for mortgage purchases. Since you don’t know what score your lender will use, do your rate research within two weeks.

It can seem difficult to complete your mortgage search in such a short time. But doing your comparison shopping within two weeks has another advantage. In today’s housing market, mortgage rates are on the rise. You want to find a mortgage lender and fix a rate as soon as possible. Also, there will most likely be competition for the home you want to bid on. So you’ll protect your score and get a lower rate if you’re organized and complete the pre-approval process as soon as possible.

Stop asking for new credit

Do not apply for credit cards, personal loans, or any other type of credit until you have approved a mortgage. While you are trying to get a mortgage, you should focus on protecting your score so that it is as high as possible.

Applying for credit can not only lower your credit score, but also increase your debt to income ratio, which determines whether you qualify for a mortgage. Once you’ve gotten approved for a mortgage and the dust has settled a bit, you can apply for credit when you need it.

Pay your bills on time

Either way, making timely payments should be part of your financial life. If not, it’s likely reflected in your credit score. Payment history makes up 35% of your FICO score, so it’s the most important factor considered by the score algorithm.

So, failing to pay bills on time can quickly lower your credit score. Paying your bills on time is essential to getting approved for a mortgage, but it’s also a habit you need to adopt in the future in order to have a good credit rating.

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How to shop for a mortgage without hurting your credit score originally appeared on

Update 04/20/22:

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