 Multiple
loan applications can hurt credit score
|
 Dear
Dr. Don,
I am being told that when refinancing if my credit
report has to be pulled and it is relating to a mortgage, that it
will not affect my credit score. I have found quite the opposite.
One company pulled my credit report three times and could not close,
and a multitude of other financial institutions did the same thing.
My credit score has dropped drastically making it
even harder to find financing. The interest rate on my loan has
gone from 10.13 percent to 13.13 percent, triggering a $350 increase
in my monthly mortgage payment. I have tried at least 13 lenders
but haven't found one who would refinance my loan. I have owned
my home for two years and have never been late or missed a payment.
Doesn't that count for something?
-- Concerned Cherryl
 Dear
Cherryl,
Yes, your solid payment history on your mortgage
does count for something, but lenders hate lending to desperate
people, and they especially hate making a loan decision that goes
against the decisions made by 13 other lenders. It's a pretty tough
sell for the loan officer at the loan committee meeting.
The bit about multiple credit inquiries not hurting
your credit score is true, to a point. If you're doing some comparison
shopping over a very short time period, then multiple loan applications
aren't going to reduce your credit score. The myFICO
Web site explains it this way:
Looking for a mortgage or an auto loan may cause
multiple lenders to request your credit report, even though you're
only looking for one loan. To compensate for this, the score ignores
all mortgage and auto inquiries made in the 30 days prior to scoring.
So if you find a loan within 30 days, the inquiries won't affect
your score while you're rate shopping. In addition, the score
looks on your credit report for auto or mortgage inquiries older
than 30 days. If it finds some, it counts all those inquiries
that fall in a typical shopping period as just one inquiry when
determining your score. For FICO scores calculated from older
versions of the scoring formula, this shopping period is any 14-day
span. For FICO scores calculated from the newest versions of the
scoring formula, this shopping period is any 45-day span. Each
lender chooses which version of the FICO scoring formula it wants
the credit reporting agency to use to calculate your FICO score.
Credit inquiries that you initiate stay on your
credit report for two years but only affect your FICO score for
one year. Take a breather from your search to find a willing lender.
You'll improve your credit score and improve your odds of getting
that new loan.
Before trying again, you should request your credit
scores from the three bureaus, and see where you stand. The combination
of keeping your credit history clean and the passage of time should
get you to the point where you can refinance your mortgage.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
|
