Rate Shopping

In the grocery, we find people that touch, squeeze, and feel every apple before they choose the one they want. This is called a shopper (not everyone is a shopper there are people who just go shopping). Possibly you’re not this type when you go shopping for apples, but when making a bigger purchase, like buying a home, and applying for a mortgage, I believe every person will want to shop for the best rate. By a mortgage, the difference of a quarter-point in interest can make a much bigger difference in your monthly budget than the difference of two apples. And yes, there will be a difference in the interest rate from one lender to the next. There is no standard rate. So never settle on the first-rate quote you get.

Will It Affect My Credit Score?

10% of a FICO score is calculated on new credit, (for more on this read: The 5 Most Important Factors In A FICO Score) which means every time you apply for new credit your score will go down by a few points. The reason is that when you’re applying for a new loan, credit models look at it as a possible change in your financial status that requires you to borrow more money, and that may ultimately affect your ability to pay back what you owe. For that, you deserve a lower credit score. (They look at someone applying for a credit card as someone that is looking to borrow more money, even if you did it just to get 10% off your purchases or just to get an exciting welcome bonus.)

When you go rate shopping, every time you want to get a new rate quote, the bank will want to pull your credit. But don’t worry, in this case, most credit models will understand that you’re not applying now for several different loans and you’re only trying to get the best deal on the same loan. Therefore, under certain guidelines pointed out below they will combine the credit inquiries into one credit inquiry. Basically, even if you had five credit inquiries, they will altogether have the same effect on your credit score as one credit inquiry.

The Guidelines

In order for credit models to combine the credit inquiries, all credit inquiries must be made within a 15-45 day time frame. (Older models give you 15 days; newer models give you 45 days. As of today most Mortgage loans still use the older models).

All credit inquiries must be for the same loan amount. (Make sure to be consistent with the information you provide to the banks.)

It is only combined when applying for a mortgage or auto loan and not a credit card. Credit card inquiries never combine, even though you’re applying for all credit cards the same day and even if they are all from the same bank. (Some credit card issuers will only pull your credit once per day. More details here).

30 Day  Grace Period


A credit inquiry resulting from a mortgage or Auto loan will not affect your credit for the first 30 days after the inquiry was done. This is true even on the older scoring models which only give you 15 days for rate shopping.

Wishing you a lot of success in finding the best interest rate!