Credit scores matter.

Credit scores can mean the difference between a 4.25 percent and a 5.25 percent mortgage rate; a conforming mortgage and an FHA mortgage; an underwriting approval and an underwriting denial.

And most people know this. It doesn't stop them from keeping their credit scores under wraps, however. There seems to be a persistent belief among Americans that "having your credit pulled" is a bad thing.

In some instances, yes. In most instances, no. It's because not all credit applications are created equal.

At least, not in the eyes of the credit bureaus.

Having a mortgage company pull your credit is different from having Target do it.  To understand why, let's start with some credit scoring basics.

Credit Inquiries Are A Formal Process

A "credit inquiry" is a formal request to review a person's credit report.

Credit inquires are grouped with other traits into a credit-scoring category called "New Credit". New Credit represents a tiny 10 percent a person's complete credit score.  On the scale of 300-850, therefore, credit inquiries represent just a portion of complete category that accounts for a maximum of 85 FICO points.

Your credit score can't drop 100 points from a credit check.

Credit checks come in many flavors, but only 4 will change a person's credit score:

1. A credit check for a mortgage loan
2. A credit check for an auto loan
3. A credit check for a credit card application
4. A credit check for a store credit card, or consumer loan

These 4 types are singled out because, in each case, the initial credit inquiry is requested for the specific purpose of taking on more debt.  Extra debt increases the probability of credit default and credit scores drop as a result.

Even then, though, the risk of default varies by credit type.

A credit card application can be more damaging to a credit score than a mortgage application.  This is because credit card debts tend to revolve higher over time versus a mortgage which eventually pays down to $0.

All things equal, credit card applications harm your credit score much more than an application for a home loan.

A Credit Inquiry Lowers Your FICO By 5 Points

When compared to the other credit scoring elements, Credit Inquiries is a relative nothing.

In the official FICO scoring model, Payment History and Credit Utilization account for 65% of a score, combined, and the amount of time during which you've had credit to your name accounts for 15%.  These three areas are over-weighted because the bureaus are more concerned with what you've already done with your credit versus what you might do with more of it.

Your credit past is the best clue to your credit future.

It's one of two reasons why it's okay to give your social security number to as many lenders as you want. The impact of a credit inquiry is minuscule as compared to your history as a Model Credit Citizen.

A mortgage credit inquiry is estimated to lower a credit score by just 5 points.  Unfortunately, we'll never know for sure because the very act of examining the credit score causes it to move. In Physics, this is called the Heisenberg Principle.  On MTV, it's called The Jersey Shore Syndrome.

Put a camera on something, and it changes.

The Credit Bureaus Don't Hit Your FICO Twice

The second reason you should shop around with lenders is that -- unlike applying for multiple credit cards -- applying for multiple mortgages won't ding you for multiple, consumer-initiated inquiries.

Applying common sense: You might apply for 5 credit cards and use them all. You're won't be approved for 5 mortgages. As such, the credit bureaus have made it formal policy to permit "rate shopping".

Talk to as many lenders as you want in a 14-day time frame; have your credit checked as often as you'd like; compare rates and fees.  All of the inquiries will be lumped into a single application.

It's good for you and it's good for the bureaus. Your credit scores stay high and TransUnion, Equifax and Experian collect more fees from the banks.

Advice From The Credit Bureaus On Getting Low Rates

To promote rate shopping and to lessen The Fear of Credit Inquiry, the people behind the FICO brand spell out for you the best way to get the best mortgage rates possible:

1. If you want the best rate, you should "shop around" for it
2. Limit rate shopping to 14-day timespan to keep your credit scores high
3. Mortgage lenders need your FICO to give accurate rate quotes so give up your social security number

Metaphorically, not letting your lender see your FICO is like not letting your doctor check your blood pressure. You'll get a diagnosis when the appointment is over -- it just might not be the right one.

Start Your Mortgage Rate Shopping With A Free Rate Quote

Start your rate shopping now. and we'll start with your credit pull. From there, I'll get you a low mortgage rate to compare with other banks.

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Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.