How Hard Inquiries Affect Your Credit Score When Getting a Mortgage

A hard inquiry, also known as a hard credit check or pull, will typically lower your credit score by up to 5 points on the FICO model and can remain on your credit report for two years. However, the impact is usually temporary, and multiple mortgage inquiries within a 45-day window are typically counted as a single inquiry when you are rate shopping. Understanding how these inquiries work is crucial for any home buyer seeking a mortgage without unnecessarily damaging their credit.

What is a Hard Inquiry? A hard inquiry is a formal review of your credit report initiated when you apply for new credit. A financial institution performs this check to make a lending decision. This differs significantly from a soft inquiry, which does not affect your credit score. Common triggers for a hard inquiry include applying for a mortgage, auto loan, credit card, or even a new utility account. You must authorize every hard inquiry.

How Do Hard Inquiries Impact Your Mortgage Application? When you submit a mortgage application, the lender will request your credit report from one or more of the three major credit bureaus: Equifax, Experian, and TransUnion. This hard inquiry is noted on your report and can cause a slight, temporary dip in your score. Based on our experience assessment, the effect is often minimal for borrowers with a strong credit history and low credit utilization.

What is the Difference Between a Hard and Soft Inquiry? It's essential to distinguish between these two types of credit checks.

• Soft Inquiry: A soft inquiry (or soft pull) occurs when your credit is checked for non-lending purposes, such as checking your own credit report, pre-qualification offers, or employment background checks. These do not affect your credit score and are only visible to you.
• Hard Inquiry: As noted above, these are linked to credit applications and can affect your score. Lenders can see hard inquiries, which signal you are actively seeking new credit.

How Long Do Hard Inquiries Stay on Your Credit Report? Hard inquiries remain visible on your credit report for up to 24 months. However, their impact on your credit score diminishes quickly. The FICO score, the most widely used model in mortgage lending, only considers hard inquiries from the past 12 months. This means the primary negative effect lasts for about one year.

Can You Have Too Many Hard Inquiries? The number of hard inquiries you can have without significant harm depends on your overall credit profile. For borrowers with excellent credit, a few inquiries may have a negligible impact. However, for those with poor or fair credit, multiple inquiries can be more damaging, especially if they are for different types of credit (e.g., a car loan and a credit card) in a short period. This pattern can signal to lenders that you are a higher-risk borrower.

What Should You Do About Unauthorized Hard Inquiries? If you find a hard inquiry on your credit report that you did not authorize, it could be an error or a sign of identity theft. You have the right to dispute the inquiry directly with the credit bureau (Equifax, Experian, or TransUnion) to have it investigated and potentially removed.

Key Takeaways for Home Buyers

• Shop for mortgage rates strategically. You can contact multiple lenders within a focused period (the 45-day FICO window is safest) to compare offers with minimal impact on your credit.
• Avoid applying for other types of credit while your mortgage application is being processed to prevent unnecessary dips in your score.
• Check your credit reports regularly from AnnualCreditReport.com to monitor for inaccurate or unauthorized hard inquiries.
• Focus on maintaining strong overall credit health. A high credit score and low debt-to-income ratio will outweigh the minor impact of a few hard inquiries.