Will Getting Multiple Mortgage Quote Hurt Credit
When it comes to taking out a mortgage, it's always wise to shop around for the best deal. But, many people are hesitant to do so because they fear that getting multiple mortgage quotes will hurt their credit score. In this article, we will explore whether this fear is justified or not.
What is a Mortgage Quote?
A mortgage quote is an estimate of how much money you can borrow to buy a house and what your interest rate will be. Mortgage lenders will provide you with a quote based on your credit score, income, debt-to-income ratio, and other financial factors.
It's important to note that a mortgage quote is not a guarantee of a loan. It's simply an estimate of what a lender may be willing to offer you.
How Does Getting Multiple Quotes Affect Your Credit Score?
When you apply for a mortgage, the lender will perform a hard inquiry on your credit report. This inquiry will show up on your credit report, and it can temporarily lower your credit score by a few points.
However, if you apply for multiple mortgage quotes within a short period of time (usually 30 days), credit reporting agencies will typically count all of these inquiries as a single inquiry. This is known as rate shopping, and it allows you to compare rates without damaging your credit score.
What is the Impact of Multiple Inquiries on Your Credit Score?
If you're rate shopping for a mortgage and multiple lenders make inquiries on your credit report, the impact on your credit score will likely be minimal. According to FICO, the company that calculates credit scores, a single hard inquiry will typically lower your credit score by less than five points.
However, if you have a limited credit history or your credit score is already low, multiple inquiries could have a more significant impact.
How Can You Minimize the Impact of Multiple Inquiries?
If you're concerned about the impact of multiple inquiries on your credit score, there are a few things you can do to minimize the damage:
- Do your rate shopping within a short period of time (usually 30 days).
- Apply for multiple mortgage quotes at the same time.
- Make sure you're applying for the same type of mortgage (e.g., 30-year fixed rate) from each lender.
- Monitor your credit score regularly to ensure that there are no errors or unauthorized inquiries on your report.
Conclusion
Getting multiple mortgage quotes is a smart way to ensure that you're getting the best deal on your home loan. While it's true that multiple inquiries can have a temporary impact on your credit score, the damage is typically minimal if you're rate shopping within a short period of time. By following the tips outlined in this article, you can minimize the impact of multiple inquiries and make an informed decision about your mortgage.
