Seven Need-To-Know Tips about Your Credit Score

Allowing 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.

Unfortunately, there is no way to avoid at least one or two credit inquiries. Most mortgage interest rates are dependent on the borrower's credit score, so you cannot receive a firm mortgage loan offer until your lender has your report.

Note that 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. Your credit score will not be affected, and your prospective lender can give you a firm loan offer. Bank of England Mortgage offers a wide variety of loans, so it should not be necessary to span the globe in your search for the mortgage that fits your best.

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.

For instance, should you allow eight or nine lenders to pull your credit in a short period of time, you will notice an adverse change in your score. This is highly unusual, and there should be no reason to have that many inquiries from different mortgage lenders.

Here's a step-by-step example of how credit scores are affected by credit inquiries:

  1. You receive 12 unsolicited credit card offers by mail over the past two weeks and apply to all of them.
  2. Each credit card company will pull your credit report from one or more of the three national credit bureaus.
  3. Meaning, overnight, you will have 12 credit inquiries in your credit file.
  4. The credit bureaus have no idea whether you were approved by one or all of these lenders.
  5. Suppose you were approved for eight to 12 new credit cards with limits from $1,000 to $5,000.
  6. You now have $30,000, $40,000, or $50,000 of new unsecured credit that you can't afford to repay.
  7. 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 with 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

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. This is a great incentive to keep your credit score up.

Should your credit score be less than ideal, you may still qualify for many quality mortgage loans. Of course, you will 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 cannot be overemphasized. You should always know what information is in your credit report BEFORE you apply for a mortgage loan to keep you protected 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 applying 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 appear on your credit report, you are wise to limit the number of mortgage companies you deal with.

HUD loan credit tip: a credit report pulled by one lender cannot be used by any other lender. It’s smart to narrow your search for the right mortgage loan to only one or two lenders. If you find a lender you’re comfortable with and has one or more programs you like, stick with them.

Major league mortgage lenders, like Bank of England Mortgage, have complete menus of mortgage loan types, one of which should satisfy your requirements. If you do your homework and find a good lender that offers multiple loans you’ll consider, you will only have one credit report pulled.

Credit tip for your HUD loan: the best way to avoid having multiple credit reports pulled by different mortgage lenders is to know your credit score before applying for any mortgages. Get your one free annual credit report and use it when you interview lenders. They’ll be able to tell you exactly what they can offer you. Once you have that information, the lender will still need to pull your report themselves, but both parties will know what’s on it, and their offers will be consistent with your report. This means no unpleasant 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 feel frustrated at times, 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 necessary.

Having your credit report pulled by the lender you want to work with will not seriously affect your current credit score. However, it will allow your mortgage lender to give you an honest interest rate and loan program offer, which is crucial to finding the accurate loan program for you.

To avoid unpleasant surprises, check your own credit score BEFORE you get serious about a mortgage loan. This will help your mortgage company find the best loan and interest rate for you. Although they will still need to pull your credit independently, having it immediately will be a good starting point. If your score isn’t as high as you'd like, you'll have a good idea of where you stand and can proactively work to correct your score or raise it.

Most Mortgage Credit Reports Contain Information from All Three Credit Bureaus

You may assume that all three national credit bureaus have identical information. The reality is that there are often some differences in the total information or how 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 pulled three times.

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 relatively small, but occasionally, there are some wider variances. Most mortgage lenders will use your middle score to give 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 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 in protecting and safeguarding 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 security and encryption level 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 credit score strongly influences your interest rate and type of mortgage loan, so a report must be pulled.

With the highest security level 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.