Allow Mortgage Lenders to Access Your Credit Report
It is important to understand how pulling your credit report affects your personal score. While it is true that an abundance of credit inquiries can reduce your score a bit, having one or two mortgage lenders access your credit report will not harm your score. Should you allow 8 or 9 lenders to pull your credit in a short period of time, you will notice a negative change. But, there should be no reason to have that many inquiries from different mortgage lenders.
There is no way to avoid at least one or two credit inquiries, however. Since most mortgage interest rates are dependent on the borrower’s credit score, you cannot receive a firm mortgage loan offer until your lender has your report. Remember, ENG offers a wide variety of loans, so it should not be necessary to span the globe in your search for the best mortgage for you.
Remember, credit reports are not “product specific.” You can qualify for more than one type of loan from the same lender without having them pull multiple credit reports. One will do nicely. Your credit score will not be affected and your prospective lender can give you a firm loan offer.
Credit Scores Can Go Down if Multiple Credit Reports Are Pulled
Pulling a mortgage credit report should not negatively impact your credit score, but there are conditions under which your credit score can be negatively affected.
Here’s an example that may clear up any misunderstanding:
Let’s say you’ve decided to become the king or queen of credit cards. You gather up the last 12 unsolicited credit card offers you’ve received by mail over the past two weeks, and apply to all of them. Each credit card company will pull your credit report from one or more of the three national credit bureaus. Overnight you will have 12 credit “inquiries” in your credit file. The credit bureaus have no idea whether you were approved by one or all of these lenders. Suppose you were approved for 8 to 12 new credit cards with limits from $1,000 to $5,000. You could now have $30,000, $40,000, or $50,000 of new unsecured credit that you can’t afford to repay. Because of the number of inquiries and potential new levels of credit obligations, the credit bureau’s credit score software factors this data into your score and reduces it.
This should not be an issue with your mortgage application. You should settle on one mortgage lender that has one or more loan programs that appear to be perfect for your situation. After you have established a comfort level with the lender, allow them to pull your credit report. One or two credit inquiries will not seriously harm your credit score since it should be obvious they are mortgage loan credit requests and should not negatively impact your debt-to-income status.
How Mortgage Interest Rates and Credit Scores Are Related
For better or worse, your mortgage interest rate and your credit score at the time of application are directly intertwined. In recent years, most mortgage lenders have linked their interest rates with different ranges of credit scores. The higher your credit score, the lower the interest rate you are offered. That’s the good news or bad news depending on your personal credit score.
Should your credit score be less than ideal, there is still some good news. Instead of being rejected, you will still probably qualify for many good quality mortgage loans. You will, of course, be offered a higher interest rate, but you can still receive the loan you want and complete your purchase or refinance.
The importance of keeping your credit score as high as possible need not be over emphasized. However, always know what information is in your credit report BEFORE you apply for a mortgage loan to keep you safe from unplanned negative surprises. You are permitted to receive one free credit report per year. You can also get one at no cost anytime you are refused credit, even if it happens with a credit card or personal loan. Take advantage of these offers before you apply for a mortgage loan and immediately correct any errors you see.
How to Avoid Having More Than One Mortgage Lender Pull Your Credit Report
To ensure that you don’t have a large number of credit inquiries from many different lenders appear on your credit report, you are wise to limit the number of mortgage companies with whom you work. Remember, a credit report pulled by one lender cannot be used by any other lender. You want to narrow your search for the right mortgage loan to one or a maximum of two mortgage lenders. If you find one that makes you comfortable and has one or more programs you like, stick with them.
The good news: Major league mortgage lenders, like Bank of England Mortgage, have rather complete menus of many mortgage loan types, one of which should satisfy your wishes. If you do your homework, and find a good lender that offers multiple loans that you might consider, you will only have one credit report pulled.
The best way to avoid having multiple credit reports pulled by different mortgage lenders is to know your credit score BEFORE you make any mortgage applications. You are eligible to get one free credit report per year. Use this important gift before you get involved in seriously considering any loan or lender. Even if you’re “interviewing” different lenders and programs, by knowing your score in advance, lenders can make more serious offers of rates and terms to you.
After you’ve found the mortgage lender with the program(s) you want, you can then allow them to pull your credit report with no nasty surprises. If you are considering two or three different types of loans from this lender, your credit report can be used for whichever loan you choose.
Lenders Need a Credit Report Before They Can Make a Firm Interest Rate Quote
While you may, at times, feel frustrated, you must understand that a mortgage lender cannot realistically quote you a firm interest rate until they have examined your credit report. Most mortgage interest rates and, sometimes, the loans themselves are dependent on your credit score. While this fact may be discouraging if your credit score is not where you’d like it to be, it is a necessity and a reality.
You may have been told that mortgage inquiries might lower your credit score even further. But you need not worry about one or two lenders pulling your report. This will not seriously affect your current credit score. It will, however, allow your mortgage lender to give you an honest interest rate and loan program offer.
To avoid unpleasant surprises, check your own credit score BEFORE you get serious about a mortgage loan. You are allowed to obtain a free report every year, so take advantage of this feature. Even if it’s not as high as you’d like, at worst, you’ll have an idea of where you stand. This will help your mortgage company find the best loan and interest rate for you. Don’t forget, even if you get your report, your lender will still have to get their own. This will not negatively affect your credit score.
Most Mortgage Credit Reports Contain Information from All Three Credit Bureaus
You may assume that, since there are only three national credit bureaus, that each would have identical information. Therefore, you might question why mortgage lenders access all three? The reality is that there are often some differences in the total information or, at times, the way it is reported to the various bureaus. To eliminate or, at least, minimize these differences, most mortgage lenders request a “3 in 1” or “merged” credit report. Don’t worry; this is only one credit report, not three, so your credit score will not be negatively affected.
As you can imagine, your mortgage lender receives three separate credit scores from the bureaus. Because of the usual information variances and the slightly different methods used by each bureau, your credit scores will also not be identical. The differences should be rather small, but occasionally, there are some wider variances. Most mortgage lenders will use your middle score for purposes of giving you a firm loan quote and offer. For example, say your credit scores are:
- Experian 688
- Trans Union 679
- Equifax 664
In this case, your mortgage lender would use your Trans Union score (679) instead of your high or low numbers. If you have an auto loan with GMAC Finance for your car, this loan will only show up once on your tri-merged report, but your payment experience will be calculated into each bureau’s score. If your lender just pulled a report from Equifax (664), you might possibly have to accept a higher interest rate.
Pulling a Mortgage Credit Report Does Not Pose an Identity Theft Risk
The subject of identity theft is important to everyone and we all should remain diligent to protect and safeguard our personal, sensitive information. However, you shouldn’t be concerned about allowing a mortgage lender to access your credit report. Legitimate mortgage lenders have secure computer systems and firewalls. The three national credit bureaus use the highest level of security and encryption to safeguard everyone’s private information.
It should be comforting to know that both mortgage lenders and credit bureaus use state-of-the-art security because pulling your credit report is necessary before you can get a firm offer for a mortgage loan. Your interest rate and type of mortgage loan are strongly influenced by your credit score, so a report must be pulled.
But, don’t worry about identity theft. With the highest level of security in place, there is little risk that your sensitive information will fall into the wrong hands. Your mortgage lender will usually make only one request for a report from all three credit bureaus. Your credit score won’t be negatively affected and your sensitive information will be protected from hackers.