Shopping for the best mortgage won’t negatively impact your credit rating if you
do all your shopping in a short period. Since the market can change from day to
day, this is the only effective way to shop anyway.
Credit inquiries are a negative factor in determining credit scores. That’s
because statistical studies show that multiple inquiries are associated with
high risk of default. Distressed borrowers often contact many lenders hoping
to find one who will approve them.
As in your case, however, multiple inquiries can also result from applicants
shopping for the best deal.
To avoid catching shoppers in their net, credit scorers ignore inquiries that
occur within 30 days of a score date. Suppose I shop a lender on May 30, for
example, and the lender has my credit scored that day. Even if I had shopped
50 other lenders in May and they had all checked my credit, none of those inquiries
would affect my credit score on May 30.
Inquiries from April and back 11 months would, however, be counted on May 30.
To avoid biasing the credit score from earlier shopping episodes, the scorers
treat all inquiries that occur within a 14-day period as a single inquiry. If
you shopped 50 lenders during April 1-14, they would count as one inquiry. If
you spread them over April 1-28, they would count as two inquiries.
You will damage your credit if you spread your shopping over many months. Because
the market can change from day to day, it makes little sense to do this in any
case.
Circumstances can cause a consumer to shop, drop out of the market, and return
later when conditions are more favorable. You minimize the adverse effect by
concentrating each shopping episode to 14 days or less.
"When I order a credit report, does it have the same effect on my credit
score as when a lender orders the report?"
No, an inquiry by you to a credit bureau does not affect your credit score.
Your score could be impacted only if you made the inquiry through a loan provider.
Updated January 29, 2004
