How Many Points Will Credit Score Decrease After Loan Mortgage Inquiry
When considering purchasing a home, many individuals turn to mortgage lenders to secure financing. However, it’s important to understand the potential impact that applying for a mortgage can have on your credit score. In this article, we will explore how many points your credit score may decrease after a loan mortgage inquiry and address some frequently asked questions on this topic.
Understanding Credit Scores and Inquiries
Before diving into the impact of a mortgage inquiry on your credit score, it’s essential to have a basic understanding of credit scores and inquiries. A credit score is a numerical representation of your creditworthiness, ranging from 300 to 850. It is used by lenders to assess the risk of lending money to an individual.
There are two types of credit inquiries: hard inquiries and soft inquiries. A hard inquiry occurs when a lender checks your credit report in response to a credit application. This can happen when applying for a loan, credit card, or mortgage. On the other hand, soft inquiries do not affect your credit score and occur when you check your own credit or when a lender pre-approves you for a loan.
Impact of a Mortgage Inquiry on Credit Score
When you apply for a loan mortgage, a hard inquiry will be made on your credit report. The impact of this inquiry on your credit score will depend on several factors, including your current credit standing and credit history.
On average, a single hard inquiry can cause your credit score to drop by around five points. However, the impact can vary depending on your individual circumstances. If you have a strong credit history and score, the impact may be minimal and short-lived. Conversely, if your credit score is already low or if you have multiple recent inquiries, the impact may be more significant.
It’s important to note that credit bureaus typically group inquiries made within a specific timeframe, usually 14 to 45 days, as a single inquiry. This is known as rate shopping, and it allows individuals to compare loan offers without significantly impacting their credit score. So, if you’re planning to shop around for the best mortgage rates, try to do so within a short period to minimize the impact on your credit score.
Frequently Asked Questions
1. How long do hard inquiries stay on your credit report?
Hard inquiries generally stay on your credit report for two years. However, their impact on your credit score diminishes over time. After six months, the inquiry’s effect on your score may become negligible.
2. Will multiple mortgage inquiries hurt my credit score?
Multiple inquiries for the same type of loan made within a short period, generally 14 to 45 days, are treated as a single inquiry. This allows you to shop around for the best mortgage rates without significantly damaging your credit score.
3. Can I check my credit score without it affecting my credit?
Yes, checking your own credit score is considered a soft inquiry and does not impact your credit score. You can monitor your credit score regularly without worrying about negative consequences.
4. Can I remove hard inquiries from my credit report?
Hard inquiries can only be removed from your credit report if they were made without your consent or if they are inaccurate. In such cases, you can dispute the inquiry with the credit bureau and provide supporting documentation.
In conclusion, while a loan mortgage inquiry may cause a temporary decrease in your credit score, the impact can vary depending on your credit history and individual circumstances. By understanding how credit inquiries work and shopping around for the best rates within a short timeframe, you can minimize the potential negative effects on your credit score. Remember to regularly monitor your credit score and report for any inaccuracies or unauthorized inquiries.