Pulling You Down!
Any application for credit can result in your credit report being pulled by the potential creditor. Whether it’s for a mortgage, a VISA card or a furniture store, it can impact your credit score. One potentially hazardous practice is applying for credit over the internet. If you apply for a mortgage loan or equity line on an internet site that offers “multiple” quotes from different lenders, your information is being distributed via that site to all of those potential lenders. In order for a lender to provide you with a quote for loan terms, they need your credit scores. If your qualifying information is sent to 12 lenders for rate quotes, each one of them can pull a credit report. That’s 12 credit inquiries, which can drop your score. Then, if you seek a loan with several local institutions, they will also pull a credit report. It is very easy for inexperienced borrowers to have their credit pulled excessively because they are “shopping” for the better mortgage rate.
A client was recently referred to me after her loan was denied by an online lender two days before closing. In order to determine whether or not I could help her get a loan, I had to pull her credit report. I discovered that, since she had applied for a mortgage with an online company that offered “competitive” quotes from multiple lenders, her credit had been pulled over 7 times. By the time she found a house, contracted to buy it and scheduled to close, her lender of choice pulled credit again, just prior to closing. The numerous credit pulls earlier had reduced her score to the point that she no longer qualified for their loan program. While I was ultimately able to get her a loan to purchase the house she wanted to buy, her rate was considerably higher than what it would have been with her initial credit scores.
Shopping online for anything can have potential pitfalls but shopping over the internet for mortgages is risky for anyone that isn’t extremely well-versed on credit and the mortgage process. If you are unsure of your credit status or lack a good understanding of the mortgage process, you would do well choosing local bank or mortgage broker to assist you when seeking financing for a home.