Shop for a Mortgage Without Hurting Your Credit
Shop for a mortgage without hurting your credit score is an interesting blog that is written by our preferred lender, Dan Tharp. Enjoy — JaCi Wallace.
Do you have to pull my credit? I don’t want you to hurt my score that I have worked so hard to maintain.”
Let’s set the record straight first, having a lender pull your credit for a mortgage will have little to no effect on your score, also called a FICO score. The bureaus are very clear – FICO scores ignore inquiries made in the 30 days prior to scoring. If your lender or multiple lenders pull your score within 30 days, the inquiries won’t affect your scores while you are rate shopping.
Applying common sense: You could apply for three credit cards, and that would have an immediate impact on driving your scores down. But applying for three mortgages, the bureaus understand that you will only obtain one mortgage.
Advice: If you are serious about getting approved for a mortgage loan, don’t be too shy about giving the lender what they need (SS #, date of birth, etc.) so they can provide you with an accurate quote. By not allowing them to pull your credit, it’s akin to going to the doctor and not letting them check your blood pressure or not sticking that annoying piece of wood on your tongue – They can’t help you without the right information.
Tips to Keep Your Scores Low: If you’re shopping for a home or thinking of refinancing, it’s good to know how everyday credit behaviors can affect your scores. Here are some tips:
First, keep a cushion on your credit cards. Thirty percent of your credit score is dependent on how much you owe versus how much you can borrow. Amount Owed calculates (1) What you owe versus (2) How much your credit limit is. The bureaus want to see at least 70% of your credit available. If you can keep your cards at least 70% available credit, your credit scores should improve.
Second, don’t make major purchases on credit before making a mortgage application, including opening a store charge card just because it will save you 20% or more on a washer/dryer set or for any other appliance or furniture piece. Wait until your realtor hands you the keys to your new home to start making those big purchases.
The reasons for this are two-fold. Many store charge cards are often opened with a limit matching your initial charge, rendering them 100% utilized – terrible for a FICO score, as discussed above. And, two, opening a new charge card has a negative FICO impact anyway.
Third, make your monthly payments on time — even the ones that are in dispute. You may not want to pay that $100 wireless phone bill, the one that you think you don’t owe, but remember that Payment History accounts for 35% of your credit score. Even one late payment — or collection — and your credit score can drop.
It’s often a better remedy to pay that disputed bill today than to be relegated to a higher mortgage payment every month because you didn’t get a better rate.
If you need a few pointers to improve your scores, call me, we can review a more detailed analysis of tricks and methods we have learned over the years. Also, we work with some very talented and local credit specialists that we can refer you to. You would be surprised at the big difference a small change can make.
|— Dan Tharp
Branch Manager, Guild Mortgage