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Credit Scores: Why Another Mortgage Credit Report Won’t Hurt Your Scores
Ever played “telephone”?
That’s the childhood game where a bunch of kids sit in a circle and one starts by whispering a phrase to the kid sitting next to him. The second passes the phrase to the third and so on around the circle. The game usually ends with last person and the entire group laughing wildly at the mutated final version of the original. Where credit is concerned, it sometimes feels like a game of “telephone”.
It’s not that people are stupid. The three big credit repositories don’t want us to know exactly how it works. If people find the cheat codes, then an 800 Fico score becomes meaningless. But it’s also true that much of what enhances credit scores defies common sense.
In my experience, the most common misunderstanding involves credit “inquiries”. I encounter this frequently when pre-qualifying prospective borrowers, who have heard the common myth that running a credit report will damage their scores. Some of this problem originates with lenders who use this threat to discourage their clients from shopping around. But the idea has taken on a life of its own. It’s become a little pearl of wisdom people share with misinformed confidence. But it’s like saying you’ll die if you catch a cold.
Here’s the truth. The credit bureaus understand that people shop around for mortgages and shouldn’t be penalized for doing so. So they have decided that all mortgage credit reports run during a given period of time shall count as a single inquiry. TransUnion and Equifax allow 45 days. That means that you can pull a mortgage credit report everyday for six weeks and those two scores won’t change. Here’s the rub. Experian allows only 15 days. But since lenders make decisions based on your middle credit score, don’t worry. Even if your Experian score drops, the other two—and therefore your middle score—are still intact. Or if it makes you feel better, you could just pull just TransUnion and Equifax for a quick update.
In upcoming posts, I’ll continue to provide valuable insight about credit. These aren’t the cheat codes, but knowing the truth will enable you to build and maintain healthy credit.
Got a question about this stuff? Email me.
February 2nd, 2007 at 9:26 am
[…] Don’t be too concerned about harming your scores. Experian sees all mortgage inquiries during the past 15 days as a single inquiry. TransUnion and Equifax are far more generous, allowing 45 days. Getting a snapshot of your credit early in the process allows time to work on your scores if they need sprucing up. I’ll be posting in the next few days on a new tool that will allow me to play “what if” with credit scores to determine the most effective way to quickly raise low scores. Stay tuned! […]