At a time when lending is tight, and it’s more difficult to get a mortgage than it has been in the last 10 years, it is important to safeguard your credit score. As your credit score is a major factor in the interest rate you’ll be able to get on a mortgage, keep an eye on it and don’t risk unnecessary drops in your score. What’s a drop that isn’t necessary? Inquiries on your credit score can impact it negatively. Too many inquiries in a short period can result in drops of 25 to 100 points.
While it isn’t a common story, one home buyer found out the hard way about shopping for the best mortgage rates. The higher the mortgage interest rate, the higher the interest and payments, so naturally we all want to get the best rate we can. Our home buyer, we’ll call him George, went to a local mortgage broker for a quote on mortgage rates for a new home. Running his credit, the broker gave him some rates for different mortgage options. George thought they were fine, but wanted to shop around.
The problem was that George chose to respond to an online offer to have banks contact him with rate offers. This sounded great, as he would save a lot of time and hassle, just filling out a form and sitting back to wait for the quotes. Unfortunately, somewhere in the process he provided the information and permission to check his credit in order to give him the rate quote.
50 banks and 40 inquiries later, his credit score was dramatically lower and he could no longer get the original rate he was quoted. Don’t release your information for wholesale checking of your credit, as it can work against you.