Does My Applying For a Mortgage Affect Your Credit Rating
Before applying for a mortgage, there are a number of questions that a borrower should have in mind. It is very important that these questions should be answered before submitting a mortgage application just to make sure they won’t have any difficulties along the way.
One of the most interesting questions borrowers raise is; if applying for a mortgage will it have an impact to their credit rating. A mortgage application is a long term financial commitment and it certainly does not mean your credit score should not matter once you have been approved for a loan or mortgage. The truth is that it should matter because maintaining a good credit score for the future will help in lots of other ways. So please bear in mind that applying for a mortgage, whether it has been approved or denied by the lender can lower your credit score but only slightly.
This small impact on your credit rating occurs due to the initial credit check which generates additional inquiry on the credit report of the borrower. The impact is the same whether you were rejected or approved and decided not to take the loan. Some mortgage providers will however query your credit rating in a way that doed not affect your credit score. It is best to ask the provider if this is the case with them.
There are basic facts about mortgage inquiries from a company that creates the scoring algorithms that most lenders use. An average inquiry lowers the score by less than five points. Though inquiries remain the same on the credit report for two years, the scoring formula used by the company will only consider it for the first year. If a mortgage inquiry is affecting your score, it only does so after the first thirty days and the scoring formula will ignore any mortgage inquiries up until that point.
Some buyers decide on a mortgage provider without shopping around to different mortgage lenders for the best rate of interest if that particular lenders inquires do not affect their creditrating, but this is not the best way to decide. It is better to perform a comparison search with a mortgage broker and should pay off in money savings both in the short and long term. Applications for mortgages are treated in a different way on a credit report compared to other matters such as personal loans and credit cards.
Though mortgage application inquiries show up on every credit report received by the lender, if they are within fourteen days, they won’t have any impact on the credit score. This will then enable the consumer to shop for the best rates without being penalised for evaluating each lender.
Aside from giving customers a good idea on how a lender compares to another, it will also be clear to the lender that you are doing a comparison shop for the best interest rates and lowest set up fees. Often, this benefits the customer in making the lender more negotiable with items they can control like APR and lender fees.
On the other hand, a buyer must know what they should expect when completing an application for a mortgage. If the customer has made more than six inquiries, in some cases, this could cause a delay in getting approved or denial of a mortgage.
Buyers who have made late payments or have unpaid bills can expect denial or terms of the mortgage which may not be as attractive as someone who has a great credit score. And while it is possible for one to shop at different banks, for better APR and interest rates without gettingh a reduction in your credit score, it is also possible for banks to examine your creditworthiness.