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I am in the process of applying for a home mortgage for the first time and something happened that I found a bit odd. Here's the sequence of events:

  1. Before talking to any lenders, I get my credit score from Equifax to have an idea of where I am at.
  2. I talk to a couple of lenders and get a couple of quotes. One of the lenders runs a credit inquiry to all 3 credit agencies (I know only one lender did this, because I subscribe to an identity theft protection service that alerts me to all inquiries).
  3. I ended up deciding to go with that lender. They run a second credit inquiry on all three agencies almost exactly one month apart from the first one.
  4. I get a Equifax credit report in the mail from the lender for the second inquiry. My credit score is a whooping 30 points lower than when I checked at 1. Nothing else happened in this one month period that would justify a credit score change.
  5. The lender asks me to justify in writing the first credit inquiry that they did!

My main question is, is it usual for the bank to do those two credit inquiries so close together? Point 5 in particular makes me believe they made a serious mistake.

If this is not usual, what recourse do I have? I have sent them an email asking for an explanation and I am waiting to hear back. Can I get them to clear up what happened with credit agencies? Is there some consumer protection agency I can report this to?

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I'd be inclined to respond, "You pulled two reports 30 days apart. They now appear on my report, dragging my score down. I was going to ask you to justify this." –  JoeTaxpayer May 9 at 14:03
    
@JoeTaxpayer, that is essentially what I responded in an email, still waiting to hear back. –  toth May 9 at 14:18
    
I understand your nervousness, but I assume the broker/lender you are working with experiences this all the time. Chat with them to see if this is just typical bureaucratic nonsense. –  MrChrister May 9 at 15:10

3 Answers 3

up vote 4 down vote accepted
  1. You can get a free (no cost, no impact) copy of your credit report from each of the 3 credit bureaus. You may want to consider getting your score from Experian and TransUnion. I'm not sure how all mortgage companies do it, but my wife and I had each of our middle scores compared, and our rate was based on the lower of those two.

  2. They shouldn't be pulling your credit report unless you're applying with them. You can ask them for a rough quote based on the credit report that you obtained, but they shouldn't be pulling a full report for a quote. If they did a hard pull on your history without your authorization, that's an issue.

  3. It sounds like they did a pull when you asked for a quote, and they did another for the application.

  4. Not terribly uncommon for your score to be affected like that. Mortgage companies will usually utilize a third party that will gather your credit information and compile it all into a single report. From the bureaus' standpoint, it looks like you're applying for 2 mortgages 1 month apart from each other.

  5. That sounds like my last point in #2. They likely made a mistake and pulled your credit report when they shouldn't have (you'll need to check your paper trail and make sure you didn't authorize a credit inquiry for a quote)

As far as recourse: I don't know if you can reverse/clean up inquiries. You can reach out to each of the credit bureaus and ask if they can be removed, but it seems unlikely.

With incorrectly reported credit issues, the entity that holds the debt must ask for it to be removed, not the affected user. The same may apply for unauthorized inquiries.

Your first point of contact for this issue, though, should be your mortgage company, as you've already done.

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I'd add that if the mortgage broker can't see what is happening and won't understand, then perhaps that isn't the right institution to be borrowing money from to begin with. –  MrChrister May 9 at 15:13
    
Thanks for a great answer! Regarding your point 1, I have tried to do this in the past but I could never find out the correct way of doing this - I always end up at a website that asks for my credit card. Could you advise where to go for this? –  toth May 9 at 15:14
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@toth - money.stackexchange.com/a/723/91 –  MrChrister May 9 at 15:15

It is not unusual for the lenders to make a second inquiry during the process. They are trying to protect themselves in case you add a new credit card or car loan between application and settlement.

They may also ask for a bank statement update to make sure the down payment or settlement money hasn't been spent. I had this happen to me when trying to sell a condo, the buyer bought a car the week before settlement.

The fact they are confused about the source of the first inquiry isn't that unusual. Their procedures may demand that everything be explained, even what appears to be trivial.

Unless the lower score increases your interest rate, or causes you to not qualify for the loan, there is little you can do about it.

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How do I check if the lower score does lower my interest rate? I didn't lock the rate yet, and so I'm subject to market rate changes until I do. Is there a way of knowing if the rate I eventually get would have been higher with a better credit score? –  toth May 9 at 14:20

Credit pulls for Mortgage fall in a different category.

As per FICO

  • Any number of pulls by various lenders in a 14 day period will not result in a new inquiry
  • Lender may pull your credit again at the time of closing (for obvious reasons) but this information should be disclosed to you during the application process.
  • Score deduction for Mortgage related inquiries should happen by the end of the month, not immediately.

So as suggested by other users, pull your credit reports and scores from all three agencies. The annualcreditreport.com's free Credit report doesn't include the scores. You can use the following services as free alternatives (if available to you)

  • CreditKarma, CreditSesame for Transunion scores
  • Walmart or Discover card for FICO scores
  • USBank or Quizzle for Experian scores

I don't know of any ways (or can't recollect) for getting free scores from Equifax though.

Inspect the "Inquiries" category to see if inquiries from both the lenders are listed. You may use the online dispute process from these three credit bureaus to get them taken off if you do not believe that the lender did not disclose all the necessary information from you before doing a hard pull.

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