There comes a time in every person’s life where they take the plunge to finance something, in order to make a large purchase. One of, if not THE, largest purchases a person will make in their lifetime is buying a home. Think about it, the amount of money put into paying for a home, the lengthy terms of most mortgages, the interest paid back for the privilege of borrowing money from a lending institution. Buying a home is a HUGE investment. One of the questions that one may have, when it comes time to have their credit “checked” is “How much does a credit pull effect my credit score?” Most of us have heard that it is not a good thing to do, to have your credit “pulled” (as they say in the industry) very often. We have asked a few of the lenders that we work with to help us uncover exactly how much a credit pull effects one’s credit score.
What we have found is that this question is one that is difficult to find a solid, across the board answer to! The fact(s) are as follows, the “exact” impact is really unknown, and the answer is a two part answer. FACT #1: EVERYONE’s credit file is completely different. Therefore, every little aspect is calculated differently. FACT #2: The true value of the FICO scoring equation is “top secret”. If we knew the exact formula, we would all have perfect credit scores! (850 is a perfect credit score).
Here is what we have been able to decipher, from what is going on “on average”. The effect of a pull on one’s credit score is usually anywhere between 2-10 points for a “hard” inquiry. Hard means the first time someone fills out a mortgage application and inquires about being qualified for a loan. Anytime ANYONE looks at your credit to establish any line of credit, that is classified as a “hard” inquiry. This could be for a mortgage loan, car loan, bank loan, credit union loan, etc. Here is where some other aspects come into play, so being smart if you are shopping around for a better rate, will help you gain access to the most information with the least impact on your overall score—A mortgage “hard” inquiry, theoretically, is on file for 30 days and covers that time period. So, technically, one could have their credit pulled for an initial inquiry and then shop around for a better rate and as long as the “shopping around” is done within 30 days, all of those subsequent pulls will only count as that ONE, initial “hard” pull! A consumer could walk into a mortgage company, complete their application, walk out the door and go to another mortgage company, have their credit pulled again, and again, and again, over and over for the next 30 days, and it would only count as being pulled ONE TIME! Something to keep in mind as you look for the best rate that you can get, when it comes time to financing a home. Car loans are the same way but the time period is only 5-10 days, as opposed to 30 days for a mortgage. A “hard” pull is also one that stores do when they entice customers to open a line of credit at a department store or something along those lines. Those do affect your credit score and those pulls will show on your credit report and lower your score, if only by a few points.
There is such a thing as a “soft” pull as well. A “soft” pull is one like a bank may do to open a checking account, or that an insurance company may do, just to make sure that the consumer is up to par and to check for credit card interest rates. Those types of pulls are considered “soft” pulls, and do not affect your credit score at all.