You’re getting ready to buy a home, and you’ve heard that you shouldn’t let anyone check your credit too many times. Maybe a friend told you that every credit check knocks points off your score. Maybe you’ve seen an ad warning about “too many inquiries.” Some of that is true, but a lot of it is overblown. What matters is knowing the difference between the two types of credit checks and when they happen. If you get this right, you can shop for a mortgage without damaging your chances of approval.
First, know that there are soft inquiries and hard inquiries. A soft inquiry happens when you check your own credit, or when a company pre-approves you without you asking. Those don’t affect your score at all. You can check your own credit as often as you want, and it won’t hurt anything. In fact, you should check your credit report several months before you apply for a mortgage. That way you can spot mistakes and fix them before a lender sees them. Hard inquiries happen when you actually apply for credit, like a credit card, a car loan, or a mortgage. Each hard inquiry can shave a few points off your credit score. That’s the one people worry about.
But here’s the good news for homebuyers: mortgage lenders know you’re going to shop around. They expect you to talk to a few different banks or brokers to find the best rate. If you do all that shopping within a short window, usually 14 to 45 days, the credit scoring models count those multiple hard inquiries as just one inquiry. That’s because they understand you’re not trying to open ten new credit cards. You’re just comparing mortgage offers. So don’t be afraid to talk to two or three lenders. Just try to do your rate shopping within a two-week period. That way the damage is minimal, and your score won’t take a serious hit.
The real problem comes from hard inquiries that happen outside that shopping window. For example, if you apply for a mortgage, then month later decide to finance a new car, and then open a store card to get a discount, those are separate hard inquiries that all count against you. Lenders look at your credit history and see a bunch of recent applications for new credit. That makes you look like someone who might be overextending. So be smart. Don’t apply for any new credit cards, car loans, or personal loans in the months leading up to your mortgage application. No matter how small the card or how good the deal, just wait. Buy the furniture after you close on the house. Hold off on the new truck. Your mortgage rate depends on your credit score, and every point matters.
Another thing to watch out for is letting a lender check your credit before you’re fully ready. Some lenders will tell you they need to do a “hard pull” just to give you a quote. That’s not always necessary. You can ask for a written estimate based on the information you provide, and they can give you rates without touching your credit. If they insist on a hard pull, make sure you’re actually ready to move forward. Otherwise, you might get a surprise hit to your score. A good rule of thumb is to only allow a hard inquiry when you have a pre-approval letter in hand or you’re actively submitting an application.
Also, remember that checking your own credit is never a problem. Many homeowners are scared to look at their score because they think it will lower it. That’s a myth. You have the right to check your credit reports from the three major bureaus for free once a year, and you can check your score through your credit card company or a service like Credit Karma as often as you like. None of that counts against you. In fact, it’s a good idea to do a full review of your credit report before you start house hunting. Mistakes on your report are more common than you think, and fixing them can take time. If you find an error, dispute it with the credit bureau. That’s a process that can take a few weeks, so start early.
The bottom line is simple. Hard inquiries matter, but not as much as you might think. A few inquiries from mortgage lenders within a short window won’t hurt you. A bunch of random inquiries from other types of loans spread over several months will. So keep your credit applications to just mortgages during the home buying process. Don’t open new accounts. Don’t let anyone check your credit unless you’re serious. And always feel free to check your own credit. If you follow these rules, you’ll walk into your mortgage closing with your score intact and your rate as low as possible.
