Credit Inquiries – Way Too Much Concern
On Friday, I blogged about the difference between consumer credit scores and mortgage credit scores: Does Credit Karma Lie To You?
In that blog I pointed out why we need to run credit for every borrower and why we can never rely on the credit scores that borrowers give us verbally.
In response, several agents asked me what to say to borrowers who are overly concerned about having their credit checked by us (or any mortgage lender for that matter) because of the potential damage to their credit.
And – those questions prompted me to repeat this blog from a few years ago.
Anywhere from 700 to 1,300 borrowers (depending on rates and the time of year) come to JVM every month seeking mortgages.
And way too many of them are far too concerned about credit inquiries.
It is our strongest borrowers who are often the most concerned, which is ironic because they are the least affected by credit inquiries.
This is because credit inquires only affect a strong borrower’s credit score by a few points at most.
And even that impact disappears after a few months.
It is true that “hard inquiries” remain on a credit report for a few years, but they stop impacting credit scores long before they drop off a credit report.
Further, the credit bureaus’ scoring models treat multiple inquiries from different mortgage lenders over a 45-day period as a single inquiry.
It is only when borrowers apply for a large number of credit cards or apply for a large amount of credit from different types of credit providers over a short period of time that the scoring models become concerned.
But a single inquiry from one mortgage provider will hardly impact a strong borrower’s credit at all. And even if it does, the impact will only be a few points and it will disappear in a few months.
For readers who would like to learn more, Credit Karma has a more detailed discussion about credit inquiries here.
As an aside, I also recommend signing up for the Credit Karma App. It is a great way to keep tabs on your credit and credit score.
Founder/Broker | JVM Lending
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