Worried about Keeping Your FICO High While Shopping For A Mortgage? | Buying Real Estate in Ventura

by Gary and Lisa Schoeffler on May 7, 2011

in Latest News

So, you’re shopping for a mortgage and your lender wants to pull your credit. Only, you don’t want her to pull your credit because you’re worried it will damage your FICO.

30 years ago, that made sense. Today, it doesn’t. It’s because having a mortgage company pull your credit is much different from having Target do it.

The credit bureaus say it plainly — your credit scores won’t drop when your lender pulls your credit.

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. Mathematically, your credit score can’t drop more than that.

Credit inquiries come in many flavors, but the bureaus isolate four types as being “a search for new credit”.

  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 four 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 Mortgage Inquiry Lowers Your FICO By 5 Points

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

Great information! This is a common concern amongst buyers. If you’re thinking about buying a home, this gives you something to think about as far as not wanting to affect your credit with certain types of credit inquires prior to getting a mortgagae. As Real Estate Professionals in Ventura, we defer to the excellent Lenders we work with when it comes to items like this. If you need a referral to a Lender, give us a call and we will provide you with some to speak with.

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Post by Gary and Lisa Schoeffler

Gary and Lisa Schoeffler are Ventura Real Estate Professionals specializing in residential real estate. Their expertise in helping both buyers and sellers is widely recognized in Ventura County. How can they assist you today? Wondering what the market is like? Call them, they will be happy to talk with you about it. 805-320-4472

Gary and Lisa has written 371 articles.

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