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I'm researching mortgage options for my first home purchase, and I recently had a long call with a loan officer where he encouraged me to get pre-qualified (requiring a hard credit inquiry) as soon as possible - despite the fact that I'm not buying a home for several months.

I explained to him that I was going to wait, since I didn't want to have multiple hard inquiries since a pre-qualification would only last about 45 days and I would inevitably have to renew it. He countered by telling me that multiple hard-inquiries only hurt you if they're for different types of loans - like it would be harder for me to get a car loan if they saw multiple "hard checks" for home loans, and vice versa.

I've never heard of that, and obviously it is in the loan officer's best interest to get me to pre-qualify with him as early as possible, so I wanted to ask the community. Is what he claimed true? Assuming I don't need any other new lines of credit, can I get pre-qualified repeatedly (and with different banks) with impunity?

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    There is no harm in waiting, he is just trying to boost his numbers. If you know your credit score you can know if you will be approved or not. Your income/down payment will dictate how much of a mortgage you will be approved for. – Pete B. Mar 21 '17 at 15:10
  • I agree with waiting, but if you don't need other lines of credit - is a slight ding going to make any practical difference to you? – D Stanley Mar 21 '17 at 15:21
  • @DStanley I'm going to wait, I'm just wondering if what he said was true. A slight ding might make a difference if, a month down the road, I actually look to get a mortgage and end up with a worse rate because of it (not sure how realistic that is). – WannabeCoder Mar 21 '17 at 15:36
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    @WannabeCoder If your credit score is 750 or higher, you're probably not going to see a difference in your interest rate just because you have an extra hard pull or two. I only mention that because people sometimes make irrational decisions to "improve their credit score" without knowing whether or not it actually makes a difference. In your case, waiting does not seem irrational, though. – D Stanley Mar 21 '17 at 15:40
  • You might want to mention that the inquiries will be months apart in your question title. – Kat Mar 21 '17 at 21:04
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Assuming I don't need any other new lines of credit, can I get pre-qualified repeatedly (and with different banks) with impunity?

Yes, but only for a limited period. FICO says:

Hard inquiries are inquiries where a potential lender is reviewing your credit because you've applied for credit with them. These include credit checks when you've applied for an auto loan, mortgage or credit card. Each of these types of credit checks count as a single inquiry. One exception occurs when you are "rate shopping". That's a smart thing to do, and your FICO score considers all inquiries within a 45 period for a mortgage, an auto loan or a student loan as a single inquiry.

However for your situation, since you won't be getting a loan for several months, getting inquiries more than 45 days apart will each count as a separate inquiry.

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tl;dr: Your best course of action is probably to do a soft pull (check your own credit) and provide that to the lender for an unofficial pre-approval to get the ball rolling.

The long of it: The loan officer is mostly correct, and I have recent personal evidence that corroborates that. A few months ago I looked into refinancing a mortgage on a rental property, and I allowed 3 different lenders to do a hard inquiry within 1 week of each other. I saw all 3 inquires appear on reports from each of the 3 credit bureaus (EQ/TU/EX), but it was only counted as a single inquiry in my score factors. But as you have suggested, this breaks down when you know that you won't be purchasing right away, because then you will have multiple hard inquiries at least a few months apart which could possibly have a (minor) negative impact on your score. However minor it is, you might as well try to avoid it if you can.

I have played around with the simulator on myfico.com, and have found inquiries to have the following effect on your credit score using the FICO Score 8 model:

  1. One or more inquiries from a single specific category (mortgage/auto/student loan) clustered around the same time window act like a single inquiry. Note there is another category called "Other" and multiple inquiries in this category do not collapse into a single inquiry like the specific categories do.
  2. Different specific categories count as another inquiry. If in a single month you had 3 mortgage inquires, 3 auto loan inquires, and 2 personal loan inquires, this would count as 4 total inquires. (1 for mortgage, 1 for auto, and 2 for "other".)
  3. With one inquiry, your scores will adjust as such:

    • Equifax and Transunion: -5 points for 3 months; no effect after 4 months.
    • Experian: -10 points for 2 months; no effect after 3 months.
  4. Two inquiries:

    • Equifax and Transunion: -15 points for 3 months; -5 points for 4 through at least 6 months.
    • Experian: -10 points for at least 6 months.
  5. Three inquiries:

    • Equifax: -25 points for 3 months. -15 points for 4 through at least 6 months
    • Transunion: -15 points for at least 6 months
    • Experian: -10 points for at least 6 months
  6. Here's a helpful quote from the simulator notes: "Credit inquiries remain on your credit report for 2 years, but FICO Scores only consider credit inquiries from the past 12 months."

Of course, take that with a grain of salt, as myfico provides the following disclaimer:

The Simulator is provided for informational purposes only and should not be expected to provide accurate predictions in all situations. Consequently, we make no promise or guarantee with regard to the Simulator.

Having said all that, in your situation, if you know with certainty that you will not be purchasing right away, then I would recommend doing a soft pull to get your scores now (check your credit yourself), and see if the lender will use those numbers to estimate your pre-approval. One possible downside of this is the lender may not be able to give you an official pre-approval letter based on your soft pull. I wouldn't worry too much about that though since if you are suddenly ready to purchase you could just tell them to go ahead with the hard pull so they can furnish an official pre-approval letter.

Interesting Side Note: Last month I applied for a new mortgage and my score was about 40 points lower than it was 3 months ago. At first I thought this was due to my recent refinancing of property and the credit inquiries that came along with it, but then I noticed that one of my business credit cards had recently accrued a high balance. It just so happens that this particular business CC reports to my personal credit report (most likely in error but I never bothered to do anything about it). I immediately paid that CC off in full, and checked my credit 20 days later after it had reported, and my score shot back up by over 30 points. I called my lender and instructed them to re-pull my credit (hard inquiry), which they did, and this pushed me back up into the best mortgage rate category. Yes, I purposely requested another hard pull, but it shouldn't affect my score since it was within 45 days, and that maneuver will save me thousands in the long run.

  • But OP says they will not actually get a mortgage for months. Surely that means a hard inquiry now will count against them when they actually apply for a mortgage later on? – Kat Mar 21 '17 at 21:02
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    +1 - I'd never seen that granularity on the inquiries. Only knew that they stay on report for 2 years. Thought it was a quick bump after that time, not a bit every X months. Interesting – JoeTaxpayer Mar 21 '17 at 21:19
  • @Kat - You're right. Apparently I side stepped that in my original answer. I've edited it. Thanks for pointing it out. – TTT Mar 22 '17 at 5:23
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    Wow that side note is quite eye opening – Esco Mar 23 '17 at 22:48

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