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Mortgage Rate Shopping – Don’t Fear The Multiple Credit Inquiries

- Apr 10, 2021 credit, Mortgages4 comments

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 the shopper 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 wants to shop for the best rate.

With 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 Rate Shopping Affect My Credit Score?

Ten percent of a FICO score is calculated on new credit, which means every time you apply for new credit your score will go down by a few points. The reason being 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. 

When you go rate shopping, every time you want to get a new rate quote, the bank will want to pull your credit and check your credit report and credit score. This will result in multiple credit inquiries showing up on your credit report from all the different lenders that you shopped rates with. This gets many people concerned as they feel that they are kicking themselves in the leg by rate shopping, as they are scared, their credit score will fall due to the new credit inquiries and then the rates will only go up instead of down.

Special attention for rate shoppers

Fico built their scoring models to understand that a rate shopper is not applying 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, Fico will calculate all the credit inquiries as if they are only one inquiry. Basically, even if you had five credit inquiries, they will all together have the same effect on your credit score as one credit inquiry.

Rate shopping guidelines

Here are the Fico guidelines for a rate shopping credit inquiry waiver.

  1. All credit inquiries must be made within a 14-45 day time frame. (Older Fico models give you 14 days for rate shopping; newer models give you 45 days. As of today most Mortgage loans still use the older Fico models).
  2. The credit inquiry waiver is only applicable for inquiries resulting from an application for a mortgage loan or auto loan.

Another thing to know - 30 day inquiry buffer

In addition to the 14-45 days inquiry waiver discussed above, Fico confirmed that 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 called a 30-day credit inquiry buffer. (This is true even on the older scoring models which only give you 14 days for rate shopping).

Why is Fico being so generous?

You may wonder why Fico developed all these inquiry waivers and buffers. Since when is Fico so generous? But they are not being so generous here. They just mean their own pocket. Fico makes money every time a lender orders a Fico score. The more rate shopping you do the more money Fico makes. That’s why Fico wants you to feel comfortable to go rate shopping without you worrying about your credit score being impacted!

Conclusion

If you’re applying for a mortgage or auto loan then make sure to finish your rate shopping within the 14-day inquiry waiver period (as discussed above, the newer fico scoring models give you 45 days for rate shopping but the older models give you only 14 days, and as of today, the older scoring models are still the ones used for mortgage loans). 

Also, keep in mind that inquiries resulting from a mortgage loan or auto loan will have a 30-day buffer and will not affect your credit score for the first 30 days after the inquiry was made.

Inquiry waiver period Inquiry buffer period 
Fico 02  14 days 30 days
Fico 04 45 days 30 days
Fico 08 45 days 30 days
Fico 09 45 days

30 days

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

Frequently asked questions
How much does a credit inquiry affect my credit score?
There is no one answer that fits all. The amount the inquiry will affect your credit score will depend on your overall credit file. But inquiries usually have the least effect on credit than any other derogatory mark. The average effect is approximately 5 -10 points.
Can I mortgage shop at multiple banks with the same credit check?
Usually when you try to obtain a rate quote from a bank then they will want to pull your credit report and check your credit score first. But depending on the lender sometimes you can ask them to quote your rate based on your stated credit score without them pulling a new credit score. If you're dealing with a mortgage broker then the mortgage broker can often pull your credit score once and shop multiple banks with the same credit report and score.
Does rate shopping hurt your credit?
As long as all the credit inquiries occur within a 14 day period then your Fico score will not be affected by the additional inquiries.
Do credit inquiries combine for multiple credit card applications?
No. The Fico 14/45 day inquiry waiver only applies for mortgage loans or auto loans, not credit cards. (Some credit card issuers will only pull your credit report once per day).
I shopped for a car in 8 places. Anything I can do about all those inquiries?
If you shopped within 45 days, then with most Fico scoring models, all the inquiries will be counted as one
In how many days do I need to complete rate shopping for the inquiries to combine?
14 days with the older scoring models, 45 days with the newer scoring models

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Sam Sam has nearly a decade's worth of experience educating his many readers on everything credit. Sam spends his days checking out credit cards for a full report, from the minute benefit details to the shebang of welcome bonuses. Plus studying the ins and outs of building proper credit. It’s his favorite pastime and he loves sharing it with others.

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4 Comments

  1. If you go through mortgage brokers makes sure they don’t pull your credit to give you a rate, tell them to assume you have a 740 or 720 mid score, what will the rates be.
    Most lenders have rate based in brackets, 700-720, 720-740, etc.

    Reply
    • Thanks Abe. Usually, a mortgage broker will be glad to price it out even without pulling your credit especially if his rate comes in lower 🙂

      Reply
  2. experian will combine two inquiries from the same bank within 30 days if they have the same code (e. g. credit card) at your request by phone only there numbers are:
    855-414-6048
    888-888-8553
    855-246-9409
    888-397-3742

    Reply
    • Thanks for sharing!

      Reply

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