Have you ever wondered, “how many times will a mortgage lender pull my credit?” The answer varies from person to person, but here's what you can generally expect.
- An initial credit inquiry during the pre-approval process.
- A second pull is less likely, but may occasionally occur while the loan is being processed.
- A mid-process pull if any discrepancies are found in the report.
- A final monitoring report may be pulled from the credit bureaus in case new debt has been incurred.
Why are credit pulls necessary?
Few homebuyers have the cash in hand to purchase a home outright, so they work with a mortgage lender to secure a loan. However, before a lender agrees to let a hopeful homebuyer borrow potentially hundreds of thousands of dollars, they first need to assess how willing and able the borrower is to repay the loan.
When you apply for a mortgage, a loan officer looks at your credit history and score to gauge how you have handled debt in the past. The higher your credit score, the more willing lenders are to offer mortgages with the best terms and lowest interest rates.
However, you may have heard that mortgage lenders pull your credit report multiple times during the mortgage application process, which can cause your credit score to drop. Although this may be technically true, there is more to the story.
How Mortgage Lenders Check Your Credit
Lenders conduct two types of credit inquiries, but only one impacts your credit score.
Soft Credit Inquiry
This type of credit check is normally conducted by a mortgage broker to prequalify potential buyers before sending them to a lender.
Soft inquiries only provide surface-level details, such as estimated credit score, address confirmation, open credit lines, and flags with no details. Soft credit inquiries don’t require your permission, don’t affect your credit score, and aren’t visible on your credit report.
Hard Credit Inquiry
This type of credit inquiry assesses a borrower's risk level before a lender will offer a mortgage, car loan, student loan, or credit card.
Hard inquiries dive into the details of your credit history, including your current credit score, recent credit inquiries, missed payments, bankruptcies, foreclosures, and other information relevant to your creditworthiness.
Lenders need your permission to pull your full credit report, and doing so will cause your credit score to drop slightly, but only temporarily.
When to Expect Credit Pulls During the Mortgage Application Process
Now let’s answer the question: “How many times will a mortgage lender pull my credit?”
The number of times your credit report is pulled throughout the home-buying process depends on several factors, including how long it takes to finalize the sale, if there are inconsistencies between the application and the credit report, and whether any red flags pop up before closing.
During pre-approval, a loan officer pulls and evaluates your credit report, looking at payment history, debt load, foreclosures or bankruptcies, liens, civil suits, and judgments. This initial credit inquiry is standard for all mortgage applications.
Occasionally, the lender will need to pull your credit report again while the loan is processed. Credit reports are only valid for 120 days, so your lender will need a new copy if closing falls outside that window.
The lender can also pull credit mid-process if they find discrepancies between the data on the report and your current information. This can include a name change, new address, or non-matching social security numbers.
In most cases, your lender won’t need to re-pull a credit report before closing. When your loan begins processing, a debt-reporting monitor is triggered. This will alert your lender if anyone else pulls your credit while the loan is finalized.
Before closing, the lender will pull a final monitoring report from the credit bureaus to determine whether you incurred any new debt. Any new accounts must be added to your debt-to-income ratio, potentially impacting the original loan terms or even causing the loan to be denied.
How Credit Checks Impact Your Credit Score
Too many credit inquiries in a short period can temporarily lower your credit score. However, you do have the right to shop around for a mortgage.
Credit analytics providers like FICO and VantageScore give borrowers a “shopping window,” so you can shop around for the best terms and rates with different lenders without having your credit score dinged multiple times.
For example, if your credit is pulled by three mortgage lenders within two weeks, your credit won’t be affected three times. Because all three pulls came from mortgage companies, they count as a single pull.
However, if your credit is pulled by lenders from two different industries within 120 days—for example, a car dealership and a mortgage company—your credit score could drop significantly.
When your new mortgage appears on your credit report, your score will drop several points. But, as long as you make full, on-time payments, it will go back up. In fact, when managed properly, a mortgage is one of the best ways to build strong credit in the long term.
When in Doubt, Ask a Qualified Loan Officer
As you’ve read, there’s no single answer to the question, how many times will a mortgage lender pull my credit?
Partnering with a loan officer can help you navigate the twists and turns of the home-buying process, including how to minimize the impact of credit checks on your credit score.
Ask your loan officer to review a personal credit pull and manually assess your data to estimate your lending potential before doing a hard pull for a pre-qualification or pre-approval. This will help determine whether you can qualify for a mortgage without lowering your credit score.
If your credit score is less than ideal, speak with a Loan Officer at radius financial group about alternatives to conventional home loans, such as Federal Housing Authority (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA) loans.
For even more home-buying hacks, download 11 Essential Home-Buying Tips from Real Mortgage Loan Officers. Get professional advice on everything from preparing for homeownership to bringing the right materials to the closing table.
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