Finally the TRUTH about Mortgage Inquiries

Understanding how inquiries impact your FICO score is easily one of the most complicated aspects of the scoring system. This is easily on the “Top 5” list of the most misrepresented facts about FICO scores. In efforts to clear this up here are some truths about credit inquiries and how they relate to your FICO score. What you will read is 100% accurate.

  1. Inquiries are all specifically coded by the credit bureaus to reflect the industry from which they came. This means whatever “type” of credit you apply for will likely be clearly indicated.This is important because the “Type” of inquiry plays a key role in how it is evaluated.
  2. Mortgage, auto and student loan inquiries are treated differently from all other inquiry types. If you don’t already know, these are the type of loans that you can shop for the best interest rates and terms.Shopping for these loans most likely will result in your credit report being loaded up with multiple inquiries in a short amount of time.
  3. FICO doesn’t want to penalize smart consumers for rate shopping.So, rather than assume each inquiry indicates a discreet and unique credit application, they have built logic in their credit scoring model that identifies when you’re shopping for one loan rather than many loans.

Here’s how these 3 rules work in a mortgage application example…

Mortgage related inquiries, which are very easy to identify because of #1 above, are ignored for the first 30 days they’re on your credit reports.If you were to apply for a mortgage on August 15th it will take until September 15th to become “visible” to the FICO score.This means you can apply with 50 different mortgage loan lenders during that 30 day window and all 50 of those inquires will be ignored for FICO scoring purposes.In other words these inquires will have absolutely NO impact to your FICO score.

When the mortgage inquiries age past 30 days they become fair game and will be seen by the FICO scoring system.The rule doesn’t end there however.Any of those inquiries that occur within the same 45-day period will be treated as 1 inquiry for scoring purposes.So in my crazy example of applying for a mortgage with 50 different lending companies all those will only be counted as 1 inquiry because they all would have happened within 45 days of each other.

Many years ago the 45-day period was only 14 days. For this reason, you still hear some people claim that you only have 14 days to shop for a mortgage, which was true about a decade ago but isn’t true any longer.

These rules apply not only to mortgages but also to auto loans and student loans. It does not however apply to credit cards, which means if you apply for 3 credit cards then the 3 inquiries will immediately be seen by the FICO score AND they’ll all be considered unique loan/credit applications.

Author: Dan Beck

Dan Beck is a credit repair expert who teaches consumers how to create an "A Rated" credit profile. Would you like to receive a FREE Consultation with Dan? If so, click here.

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