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When should you authorize (or not authorize) a credit pull?

Gina Pogol
The Mortgage Reports editor

In this article:

You almost always need a credit pull when you apply for a mortgage. But don’t allow just anyone to do it. Here’s how to stay safe and protect your credit score.

  • Authorizing a credit pull will drop your FICO (credit) score by about 5 points
  • Credit bureaus understand that your credit may be checked many times while you shop for a home loan, and so they treat multiple checks within a short time as one credit pull
  • Do not allow a credit pull by a lender you don’t know, especially if the offer is unsolicited

Lenders require personal identification information, like your social security number, to initiate a credit pull. Protect this information as much as possible, and only provide it when you are serious about applying with a lender.

Verify your new rate (Dec 11th, 2018)

How much does a credit pull affect your FICO score?

MyFICO.com says that a single credit inquiry shaves off five or fewer points from your score. The exact effect depends on how high your score is to begin with.

Related: Does checking your credit score harm your credit?

When you ask for mortgage rate quotes from multiple lenders (as you should), they will want to know your credit score. They can’t offer you a valid quote without knowing this. Credit bureaus understand what they call “shopping behavior” and so they treat inquiries from all the mortgage lenders you contact as one.

So your score won’t take a massive hit, as long as the inquiries all come in during a short timeframe. What’s that timeframe? It depends.

How much time do you have to shop for a mortgage?

Mortgage lenders typically use a score created specifically for creditors in the mortgage industry. For those kind of inquiries, the FICO scoring system ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your scores.

Related: Don’t fear multiple credit inquiries when shopping for a mortgage

But what if you looked for a mortgage six months ago and have a bunch of inquiries from back then? FICO will consider older inquiries that fall within the “shopping period” as just one inquiry.

But how long is that “shopping period?” For older versions of the scoring formula, it’s 14 days. But the newest versions of the scoring formula give you 45 days. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.

Credit pull mistakes to avoid

There are some things you should not do just because you can do them. Authorizing credit pulls willy-nilly is one of those things.

Many folks get so excited about buying their house that they also go furniture shopping or apply for more credit that is not mortgage-related. Don’t do that; each of those credit checks will lower your score, and that can cost you more when you apply for your home loan.

Related: Credit bureau data breaches (how to protect yourself)

Don’t allow any lender to pull your credit until you have decided that you want to apply with it. That means you have determined that the lender is licensed in your state, is reputable and offers the rate and program you want.

Be extremely wary of mortgage lenders that contact you out of the blue and want your private information. They may not even be offering loans at all. If you see a crazy low rate and they want your social security number, the company may just be harvesting your information for fraudulent purposes.

Pull your own credit first

Before you shop for a mortgage, check your own report. Each of the three main bureaus, Experian, TransUnion and Equifax, must provide you a free copy of your report each year. You can get it at www.annualcreditreport.com, the only government-sponsored site for free credit reports.

Related: 6 common (and totally avoidable) mistakes to avoid when applying for a mortgage

For a small fee, you can also get your credit scores. Understand, however, that these scores will probably differ from the ones that mortgage lenders get. That’s because the lender scores are calculated specifically for mortgage credit, not like the informational scores consumers receive.

However, checking your credit first allows you to provide lenders an estimate of your score when shopping for rates. And you can find and fix incorrect derogatory information before you are under the home-buying gun.

Mortgages without pulling your credit

You can obtain a mortgage without a credit pull, or at least without the lender considering your credit score. Most of the time, these are refinance mortgages, though, not purchase loans. For instance, an FHA streamline refinance may not require an appraisal or credit check, because you already have an FHA loan and the agency is already on the hook if you default.

Related: FHA streamline refinance

The VA and USDA also offer streamline refinances. Understand that even if the program itself doesn’t require a credit pull, the lender may. Lenders are allowed to impose stricter requirements than the government’s guidelines for FHA, VA and USDA home loans.

Hard money — no credit report required

Finally, private lenders that specialize in providing fast money to investors or people with poor credit may finance you without a credit pull. But you don’t have the same consumer protections with private hard money lenders, and they lend on the assumption that you will default on the loan.

Related: Flamethrowers and high-risk loans

So they protect themselves with very high down payment requirements, several points in fees, double-digit interest rates and short terms. If you can live with that and afford it, it’s an option. But in most cases not a good one.

Verify your new rate (Dec 11th, 2018)