Reader Question: How Do Multiple Mortgage Inquiries Impact Credit Scores?
“I was told that if I made multiple applications for a mortgage refinance in a certain period of time, that it would not impact my credit score. But this isn’t necessarily true. My credit score has been lowered because of it and the banks aren’t listing them as application for a mortgage. Where does the responsibility lay? Even when I tell a lender not to pull a credit report, they do (such as my current mortgage servicer). They weren’t soft inquiries either. They ran it twice! Another lender ran my report five times last year and I only authorized it twice. I tried to dispute it but it’s nearly impossible to dispute inquiries. What can the consumer really do about this issue?”
There is a lot of confusion surrounding when it is permissible for a lender to access your credit reports. There is even more confusion about inquiries and their impact on your FICO scores. First off, access to your credit report is strictly governed by the Fair Credit Reporting Act, section 604 “Permissible Purposes of Consumer Reports.” It’s rare that a lender will simply pull your credit report without a good reason, but I have seen it happen.
What you were told about inquiries is true, but not complete. There are some important details missing. Years ago FICO installed logic in their credit scoring models that measured mortgage, auto and student loan inquiries differently because of the fact that consumers would shop around for the best deal on these types of loans. This would lead to multiple inquiries but still only one loan. As such, it made sense not to penalize consumers who were smart rate shoppers, hence the different treatment of those types of inquiries.
Mortgage inquires do count in your score so whatever you were told wasn’t 100% correct. They just don’t count for the 30 days they’re on your credit reports. After 30 days they are fair game and do count. If there are other mortgage inquiries within a 45 day period then those multiple inquiries only count as one. The same holds true for auto and student loan inquiries.
The banks don’t choose to categorize inquiries. That’s not how it works. The credit bureaus set them up with specific loan or industry designations and any reports pulled by the lender is coded or identified as being from that industry or loan type. Example, an auto dealer will be set up with an auto related inquiry.
Simply telling a lender not to pull your report doesn’t mean they can’t. Remember, in the law it gives them specific scenarios where pulling a report is fully legal. You simply saying “don’t do it” doesn’t mean they won’t. But, of course, if you think your lenders have violated the law by pulling your reports, then you certainly have the right to pursue it legally, which isn’t easy and it isn’t cheap.
Similar Posts:
- Student Loan Inquiries and Your FICO Score
- When a Credit Score Article Goes Horribly Wrong
- Dear Credit Karma… Hard & Soft Inquiries
- Carrying a Credit Card Balance Won’t Improve Your Credit Score
- Banks will have to reveal credit score if application is denied or downgraded
