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Columns: Dr. Don
Don Taylor, Ph.D., CFA, CFP   Expert: Don Taylor, Ph.D., CFA, CFP
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Multiple inquiries are accounted for in scoring
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Mortgage inquiry won't hurt credit score

Dear Dr. Don,
I've heard that numerous inquiries to your credit report can lower your credit score. Does this apply to inquiries related to mortgage "pre-approvals" or "prequalifications"?

-- Bill Bewildered

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Dear Bill,
Any time a lender pulls your credit report at your request to consider you for a loan, that inquiry will show up on your credit report and influence your credit score.

Mortgage pre-approvals will definitely generate an inquiry because the lender is making a loan commitment. A lender's prequalification isn't a loan commitment but will show up as an inquiry if the lender pulls your credit report at your request. Mortgage and car loan inquiries are treated a little differently than when you apply for a credit card. If you are shopping around for a mortgage and apply at several places, the multiple loan applications won't hurt your credit score as long as the applications were made over a relatively short period of time.

The myFICO.com Web site explains this type of rate shopping in depth:

Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you're only looking for one loan. To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for auto or mortgage inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.

A preapproval can help you close the deal on a house because you don't have to put a mortgage contingency in your offer. A prequalification doesn't really help in that regard. It's more to give you an idea what size mortgage you can afford. Bankrate's "How much house can you afford" calculator can do that and there's no credit inquiry.

Bankrate.com's corrections policy-- Posted: Aug. 15, 2007
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