April 30, 2021 Cody Marchant

How to Get Rate Quotes without Affecting Your Credit score

Your credit score plays a huge role in the home buying process. Depending on your score, it could save you or cost you thousands of dollars when purchasing a home. 

It’s important to keep your credit score high when applying for a mortgage for many reasons, but it’s a well-known fact that shopping for rates can negatively impact your score. 

So how can you shop for the best mortgage rates without hurting your credit score?

Before answering that question, you first need to understand how rate shopping affects your credit score and the different types of inquiries.

How Does Rate Shopping Affect Your Credit Score? 

Rate shopping is when you gather quotes from multiple lenders and compare the lender quotes. This process can help you get better loan terms and save more money on interest rates.

Rate shopping involves applying for several loans with multiple lenders, which can affect your credit score temporarily. However, there are different types of credit inquiries, and each affects your score in different ways.

Soft inquiries vs Hard inquiries 

Soft inquiries are lines of credit that you did not request. This often happens when your bank needs an updated FICO score or if you apply for a job and they require a credit check. Soft inquiries do not affect your credit score.

Hard inquiries are when you ask for a line of credit from your lender and the lender (or another creditor) accesses your full credit report. Hard inquiries do affect your credit score, but only by 2 to 5 points per inquiry. On average it takes 3 months to rebuild those lost points.

2 to 5 points can have a huge effect on your mortgage rate which is why many borrowers don’t want to take that hit to their credit score. Because of this, most homebuyers will only shop with one lender, thinking that it won’t affect their credit score as much. 

This is not a good idea, nor the case. 

Credit scoring models are built to identify rate shopping patterns, and when done correctly, you can submit multiple mortgage applications without the risk of hurting your credit score.

How to get rate quotes without affecting your credit score

How to Get Rate Quotes without Affecting Your Credit Score? 

Luckily, your credit score has a built-in feature for rate shopping. Here are a few ways to get rate quotes without affecting your credit score. 

Shop within a short time frame

If you allow multiple mortgage companies to check your credit report within a limited period of time, all those inquiries will be treated as a single inquiry. That time period depends on the FICO system the lender uses. It can range from 14 to 45 days.

FICO Scores ignore inquiries made in the 30 days prior to scoring. If you find a loan within 30 days, the inquiries won’t affect your scores while you’re rate shopping.

Keep the amount consistent

When applying to multiple mortgage rates, you want to maintain consistency in your inquiries. Don’t apply for $200,000 on one quote and $500,000 on another.

Don’t apply for new credit 

Applying for multiple lines or credit or loans makes you look like a high risk to lenders. If you apply for a “new” type of credit, this could be seen as a red flag and ding your credit score.

Shop for Rates with Confidence

If you’re serious about buying a home, it’s time to receive a mortgage quote, analyze it, and arm yourself with the ever-important pre-approval letter. To make things easier for you, all Loan Compass visitors pay NO LENDER FEES at Guaranteed Rate

That’s right! You save $1,2900.00 instantly!

Once you receive your quote, use our mortgage calculator to help analyze and understand your monthly payments. At Loan Compass, we want to make the home buying process as stress-free as possible for you. That’s why we’re here to help educate you through the process and try not to push unnecessary features or information on you.

For information, speak with one of our experienced loan officers today!