Christopher Ulrich
Vice President, Mortgage Lending
You should be mindful of your credit profile throughout the entire process of purchasing a home.
Buying a home can be overwhelming for first-time buyers. Lenders will ask you many questions and have you provide documentation to support your application before granting you a loan. And of course, they will require a credit check.
I am often asked if we pull credit more than once. The answer is yes. Keep in mind that within a 45-day window, multiple credit checks from mortgage lenders only affects your credit rating as if it were a single pull. This is regulated by the Consumer Financial Protection Bureau – Read more here. Credit is pulled at least once at the beginning of the approval process, and then again just prior to closing. Sometimes it’s pulled in the middle if necessary, so it’s important that you be conscious of your credit and the things that may impact your scores and approvability throughout the entire process.
Initial credit check for pre-approval
The first thing I encourage any potential buyer to do is to get pre-approved. Many realtors may not even begin to show you homes until you’ve taken this first step. You can apply for pre-approval online, face-to-face or over the phone. Lenders want to know details such as history of your residence, employment and income, account balances, debt payments, confirmation of any foreclosures or bankruptcies in the last seven years and sourcing of a down payment. They will need your full legal name, date of birth and Social Security number as well so they can pull credit.
Once you find a home within budget and make an offer, additional or updated documentation may be required. Underwriters then analyze the risk of offering you a loan based on the information in your application, credit history and the property’s value.
Credit check during the loan process – maybe
Depending on how long it takes from your pre-approval until finding a home, contracting and then closing, a lot of time could pass. As determined by Fannie Mae guidelines, credit reports are only good for 120 days, so if you get pre-approved then find a home a few months later, your report may expire during the process and need to be re-pulled. Other reasons to re-pull might be to if you cleaned up some debt, removed disputes or had erroneous items removed that could impact your interest rate.
Final credit check before closing
Depending on how recent your initial credit report was pulled and how long your contracted closing date is, a lot of time can pass from the start of the process thru the date of your closing. Since your credit report is simply a snapshot of your credit profile, it’s understandable that things can change and new credit incidents may occur on your history. Lenders pull credit just prior to closing to verify you haven’t acquired any new credit card debts, car loans, etc. Also, if there are any new credit inquiries, we’ll need verify what new debt, if any, resulted from the inquiry. This can affect your debt-to-income ratio, which can also affect your loan eligibility.
This is known as a soft pull. We don’t actually generate new credit scores, and it will not show up as a hard pull on your credit record. If the final credit check results match the first, or if your debts have decreased, closing should occur on schedule. If the new report has increased debt, the lender may ask you to provide more documentation and send your application back through underwriting to make sure you still qualify.
It’s important for buyers to be aware that lenders run this final credit check before closing. If you ever need to open a new credit card or make a major purchase before your loan closes, be sure to contact your lender first to make sure the new debt doesn’t affect your approvability or your closing date.
If you have any questions, contact me here or at 708-531-8324. For more questions we can answer about the mortgage process, check out our Homebuyer FAQ page.
FAQs
Since hard inquiries affect your credit score and what is found may even affect approval, you might be wondering: How many inquiries is too many? The answer differs from lender to lender, but most consider six total inquiries on a report at one time to be too many to gain approval for an additional credit card or loan.
Is 2 hard inquiries bad? ›
Each hard inquiry can cause your credit score to drop by a few points. There's no such thing as “too many” hard inquiries, but multiple credit inquiries within a short window of time can suggest that you might be a risky borrower.
How many times do lenders pull credit? ›
A question many buyers have is whether a lender pulls your credit more than once during the purchase process. The answer is yes. Lenders pull borrowers' credit at the beginning of the approval process, and then again just prior to closing.
How many times can you pull your credit score without hurting your credit? ›
You can check your credit score as often as you want without hurting your credit, and it's a good idea to do so regularly. At the very minimum, it's a good idea to check before applying for credit, whether it's a home loan, auto loan, credit card or something else.
Is 20 inquiries too much? ›
There's no hard and fast rule for too many credit inquiries, as the impact of your inquiries on your credit score depends on various factors, such as the type of credit you're applying for, the length of your credit history, and your overall credit utilization.
How many inquiries is too many in a month? ›
Often no points are subtracted. However, multiple hard inquiries can deplete your score by as much as 10 points each time they happen. People with six or more recent hard inquiries are eight times as likely to file for bankruptcy than those with none.
How long should I wait between hard inquiries? ›
Lenders typically perform a hard inquiry on your credit if you're applying for a mortgage, auto loan, credit card or student loan. Space out your credit applications — about every six months — to avoid major damage to your score.
What is the secret way to remove hard inquiries? ›
Unfortunately, there are no secret ways to remove hard inquiries from your credit report unless they are there in error. If you see a hard inquiry that you did not authorize, you can file a dispute with the three reporting credit bureaus and the business that reported the information.
How long until hard inquiries fall off? ›
Hard inquiries stay on your credit report for two years, but your FICO® Scores will only be impacted by hard inquiries posted in the last 12 months, according to Experian. You can request a free credit report from each of the three credit bureaus once a year.
Do multiple credit pulls count as one? ›
If you're shopping for a new auto or mortgage loan or a new utility provider, the multiple inquiries are generally counted as one inquiry for a given period of time. The period of time may vary depending on the credit scoring model used, but it's typically from 14 to 45 days.
Mortgage lenders typically use FICO® Scores☉ from each credit bureau to help determine your loan eligibility and terms. Many mortgage lenders sell the mortgages they issue to the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.
How long is a credit pull good for? ›
Most lenders will accept a credit check that is 30 to 60 days old, and the amount of time depends on the lender. Even if your lender needs to run another credit check that affects your credit score, the benefits of shopping around typically outweigh the temporary effect on your credit.
Is 700 a good credit score? ›
For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750.
Is 750 a good credit score? ›
When your score is 750, you're in a strong position to qualify for most financial products and get among the very best rates on them. A 750 credit score is considered excellent on commonly used FICO and VantageScore scales, which range from 300 to 850.
Why is my credit score going down when I pay on time? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
How long should you wait between hard credit pulls? ›
Lenders typically perform a hard inquiry on your credit if you're applying for a mortgage, auto loan, credit card or student loan. Space out your credit applications — about every six months — to avoid major damage to your score.
How many points do you lose when credit is pulled? ›
A hard credit inquiry could lower your credit score by as much as 10 points, though in many cases, the damage probably won't be that significant. As FICO explains, “For most people, one additional credit inquiry will take less than five points off their FICO Scores.”
Does pulling your credit score hurt you? ›
Checking your credit score on your own, which is a soft credit check or inquiry, doesn't hurt your credit score. But when a creditor or lender runs a credit check, that's often a hard credit check, which could affect your credit score.
Can I do multiple hard inquiries count as one? ›
Hard inquiries usually impact credit scores. Multiple hard inquiries within a certain time period for a home or auto loan are generally counted as one inquiry.
