When you’re in the market for a mortgage, it’s best to shop around to find the best rates or get better lender fees. But because this process typically involves multiple lenders checking your credit score, many buyers are concerned these credit inquiries or often referred to as “credit pulls” will hurt their score, leaving them less inclined to shop around. But the good news is as long as you follow a few guidelines, you can shop around for mortgages without doing too much damage to your credit.
First things first, there are two types of credit pulls; a “soft pull” and a “hard pull,” and there’s a stark difference between the two.
A soft pull often happens without you ever knowing about it and doesn’t affect your credit score. Sometimes these types of inquiries are done without your permission, such as in the event you receive an unsolicited pre-approved credit card offer in the mail or when a prospective employer pulls your credit as part of a background check on you. Other times a soft pull happens when you check your own credit score. And if either of these two things have happened, they are categorized as soft pulls, and will not chip away at your score.
A “hard pull,” on the other hand, can affect your score. When you’re shopping around for a mortgage, it’s not uncommon for you to speak with multiple lenders. And that means multiple requests for your credit report. This can be concerning because with every “hard pull,” your score can be impacted—unless each pull happens within a specific window. Credit bureaus are aware that potential borrowers will “rate shop,” so you generally have between a 14- to 45-day window, depending on which credit bureau, where all pulls are consolidated and considered just one.
For the purposes of applying for a mortgage, you can almost guarantee the lender will do a hard pull of your credit report. This inquiry will stay on your credit report for two years but will only impact your score for one year. It can shave a few points off your score per inquiry so if you’re shopping around, it’s important to shop around in a set amount of time to avoid being penalized for each inquiry.
Even though these hard credit pulls will stay on your credit report for two years, lenders will be able to see from your report that you’re shopping around for a mortgage, so even if your score is a few points lower than you’d like thanks to a hard inquiry, lenders may take your rate shopping into consideration when assessing your history.