Rate Shopping: How long to still be considered 1 inquiry?

Question

Hey BP! I figure I should just ask the wise BP community, but I've seen and heard different answers as to how long of a period one has to shop mortgage rates and to still be considered just one 1 credit pull. In some articles I've seen 14 days. Others, 30 days. So which is it?

If anyone can provide a good reference source as well, that'd be appreciated. Thanks.

Chris Mason · Answer

So I help folks fix their busted up credit on a fairly regular basis, I have a go-to credit fixer company that I'll use if I can't figure it out, bla bla bla.

The truth is that FICO treats its exact algorithms as a trade secret. There are very expensive software suites that have tried to reverse engineer them, but even these are off by 3-5 points about 95% of the time whenever I've used any of them. So if that software suite says that doing xyz will improve someone's FICO by "approximately 44 points," I'll quote people an expected improvement of 30-35 points so they don't get pissed at me if the improvement is only 39 points.

Specific to your question:

It's a trade secret, no one knows exactly! Maybe it's 14 days if xyz is on your credit report, maybe it's 45 days if abc is on your credit report, or maybe it's a sliding scale with 14 days having zero impact, 14-29 having a very reduced impact, and that sort of thing.

However you should not lose sleep over this. Even people with 825 FICO scores and 1 credit inquiry in the last 24 months (mine), it still says right on there "score adversely impacted by too many credit inquiries" -- excuse me there FICO? You gave this person an 825 and you're saying that 1 credit inquiry (mine) dinged their credit score? FICO, you so crazy. I know you're lawfully required to list those three little reasons, but come on.

I've got an example in my office (with name/dob/ssn/etc blacked out) of someone with two pages of credit inquiries that has a 796 FICO score that I show people.

If you're credit is good, a credit inquiry for a legitimate purposes isn't going to hurt you. Whatever that legitimate purposes was ought more than balance it out because of what you get out of that purpose (second opinion on my mortgage rate, etc). FICO scores vary month to month by 5-15 points just as the weather changes to and fro even if you do absolutely nothing different (this is why I don't like preapproving folks within about 15 points of the minimum FICO that I need, or if I do then I also tell them how they can bump it while simultaneously out house hunting), so don't think of attributing a 2 point drop to a credit inquiry.

If you have crummy credit, you need to focus on paying your bills on time (the "you" factor) and not credit inquiries ("it's not me, it's the rest of the world's fault!" approach to life).

Hope that helps!

Brian Volland · Answer

I'm going to have to disagree with you there Shaun Weekes. From Investopedia:

"Credit agencies recognize that shopping for a mortgage results in a single loan (and not multiple new lines of credit). The FICO Score, for example, disregards multiple inquires when they happen within a 45-day window; other agencies have a 14-45 day window."

additionally http://www.myfico.com/crediteducation/creditchecks/inquiries.aspx says about the same thing but in more detail.

Joel Owens · Answer

I know a lot about credit. When I was helping residential clients over 10 years ago before getting into commercial the first time home buyers would have issues.

You had to know credit very well to get them up by 40 to 50 points to the lowest qualifying guideline so they could get a loan.

When you are rate shopping they do factor certain pulls in a period of time. If you go out too long however the algorithm generally views you shopping for months as you are not able to get credit and something must be wrong so you get dinged more.

Rate shopping tends to be a waste of time. Until you have a RATE LOCK guaranteed for a set period of time 45,60 days etc. you do not have squat. All you have is a letter giving general terms subject to X,Y,Z happening.

There is Equifax, Experian, and Transunion. Some lenders pull only one and some pull all three and go by the middle score.

Terms of the loan and how they qualify you is almost more important than the stated rate calling around. Someone could quote 4.1 fixed and ask minimal information. Another could get a lot of your history and info and quote 4.3. Excited you go for 4.1 but when they dig into your file down the line they give you 4.5.

What you want is someone experienced not blowing showing sunshine up you know where and then re-trading you. I am not in the loan business. If someone is doing it awhile they will ask you the hard questions right off of the bat. Check your credit first to make sure it is the best it can be before calling around. Do not let mortgage people keep pulling your credit. Have a tri-merge report yourself that you can send them to eliminate inquiries over and over again. This will give them a first look at your credit.

They might have a policy to pull their own but you can do that later.

If you just call people for car loans or house loans they will put a ton of inquiries on your credit trying to source various loans. You want to avoid that situation.

No legal advice given.

O'brian R. · Answer

Haha, yeah when I bought my first property with excellent credit, I got the same comment that "score adversely impacted by too many credit inquiries".

Thanks Chris for sharing, this is very helpful information!

O'brian R. · Answer

Thanks for your responses Shaun Weekes

Sounds like there isn't a cut and dry answer here.

Chris Mason · Answer

I think that's because CreditKarma tells folks what they want to hear so they can push credit cards and unsecured loans and whatnot on them. And ya, confirmed 80-90% of the people that walk in my door think they have a higher FICO score than they actually do too. It could also be that the specific FICO models that we use as mortgage lenders are more conservative than the credit card FICO models - which would make sense. A $500k loan is more risky than a $5,000 credit card.

Chris Mason · Answer

Yup, that'll work. In 2016, no one should be charging credit pull fees anyways. And, ya, as a landlord this means you go-to lender might be willing to help you avoid the $25 credit pull fee you charge potential tenants if you wish (it'll be an auth form they sign instead of a $25 check they write).

Something that's also a nice bonus with this: If you meet a lender that "can't" give you a quote or any information based on reading a credit report without actually pulling it, that means you've found a dummy that doesn't know how to function without his software, and thus can eliminate him from your pool of potential lenders right off the bat because she or he ALSO isn't going to be able to handle your "I own 5 investment properties, 3 are in an LLC" scenario (mortgage software mostly kind of sucks at these deals, and frequently needs to have the human override bat swung at it... which means you need to be able to do it with a pen/paper/calculator or you shouldn't be doing it at all).

Joel Owens · Answer

I had a friend who is retired now but his mortgage company pulled credit reports for free the tri-merge.

They built in the costs when they actually funded a loan that closed.

So it was an official tri-merge  report with a lender scoring model and not one of those other sites.

Chris Mason · Answer

It actually is rare.

I'll give a rate quote if it's a REAL credit report that I deem reliable, with nothing blanked out and no pages missing. IE, basically if it's the actual credit report that another mortgage lender (& only another mortgage lender) pulled within the last month or so, and not the "credit score disclosure" summary thing (this thing tells me nothing about lates, disputed accounts, accounts in collections, foreclosures, civil judgements, etc).

Don't walk in for a quote based on Discover Card or CreditKarma or a car salesman saying you have this or that FICO score. :P

That's for an informal verbal rate quote. If you want anything in writing, including a preapproval letter, I need to actually pull credit. Relationships are a two-way street mi amigos.

And I'd be just as skeptical of someone willing to preapprove based on "stated credit score" as I would be skeptical of a lender preapproving based on stated income / stated assets. Those statements, true as they may be, often have very little to do with your qualifying credit score, your qualifying income, or your qualifying assets.

O'brian R. · Answer

I love this idea! I don't know how common it is for a lender to accept a borrower's report without pulling their own inquiry, though it doesn't hurt to ask.

And I agree that until you have a rate lock, the initial rates that are quoted are no guarantee. But the initial rate quotes are helpful to as a placeholder when running some preliminary rental numbers.

Rate Shopping: How long to still be considered 1 inquiry?

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