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Can Shopping Mortgage Rates Mean A Lower Credit Score?

shopping mortgage rates

At Team Nelson, our Dallas real estate agents know that nearly all potential homebuyers are aware that lower mortgage rates may be a result of high credit scores – but could shopping for mortgage rates actually lower your credit score? As a potential home buyer, this is a topic you need to be knowledgeable about. The short answer is no, but this is only in instances when home buyers manage shopping for a mortgage using the correct process.

If you’re shopping for a home in the Flower Mound, Highland Village, Frisco, Denton, or other areas surrounding the Dallas-Ft. Worth metro, here is how you can shop the best mortgage rates while preserving your credit score:

It’s important to know which three credit bureaus generate your credit scores; these are Experian, TransUnion, and Equifax. Creditors report such activities as auto loans, credit cards, student loans, and mortgages to these three bureaus, which is how they determine your credit score on a continual basis. Certain factors can impact your credit score on a monthly basis including:

  • Making payments on time
  • Balances on your credit cards relative to limits
  • Number of credit inquiries by potential lenders
  • How many open accounts you have, and how long thee accounts have been open

You may not know it, but car and mortgage inquiries do not hit your credit score as hard as credit card inquiries. Having several department stores who offer credit cards inquire about your credit will affect your credit score far more than auto and mortgage inquiries, usually lowering your score for each inquiry.

Mortgage and auto inquiries are less damaging to your credit score because the bureaus understand that consumers shop for those items considered “big ticket.” If you have a brief credit history or just a few accounts, every inquiry performed by credit card companies can lower your score by as much as five (5) points. This can affect your credit score for about one year.

Ultimately, credit bureaus understand that when shopping for “big ticket” items, consumers typically have multiple mortgage inquiries; the same is true when someone is shopping for a vehicle. Because the end result of car/mortgage shopping is one item, it is not as detrimental as credit inquiries performed by credit card companies, department stores, etc.

How to avoid damaging your credit while shopping mortgage rates

Overall, it’s best to have your mortgage shopping completed within 14 days, because as the top three bureaus continuously change scoring models, newer models allow consumers to shop longer for a mortgage with several lenders, with all inquiries scored as a single inquiry. You cannot know which model is being used at a lender at any specific time, however the oldest models use data reported over the past two weeks (14 days). Therefore, 14 days is a “safe” time frame.

At Team Nelson, we provide tips to potential homebuyers who are thinking of purchasing a Dallas-area home in an effort to make the process easier. Hopefully the tips above will help you understand which processes will affect your credit score, and which won’t. Contact our Flower Mound real estate agents today for more advice and guidance to help make the home buying process easier!

What People Are Saying

  • We worked with Team Nelson on our last 2 moves. They really know the market and their insight and guidance has proven to be very valuable as we get ready to transition down in size. And, the savings we realized on the sale side(s) has helped put 2 kids through college. Thanks guys!

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    Stephanie Denoyer

    Jim Pavlica is the man! Used him to sell a few properties and purchase. Would never use anyone else....ever!!!!

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    Sleep City Ops

    Everyone on the team was great. White gloves service throughout the entire process. They did anything/everything we asked for. They were very knowledgeable and straight-forward about everything.

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  • Bill and his entire team are amazing! He took us within about 10 days from looking and buying our home that met every single thing on our list of what we wanted in our next house to quickly selling the house we were in. We were able to move from one house right into our new house. Bill and his team...

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    Tim and Sara Bean

    We returned to Team Nelson after a successful home-buying experience and saved a ton of money when we sold our old house. From list to close, you won't find a better or more responsive group. I'm hoping to be in our current home for several years, but when the time comes to move, the first call will be to Team Nelson.

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    Bill Nelson and his team were great to work with! I used them once before on the sale and purchase of a home 8 years ago and everything went as anticipated. When we recently decided to purchase another home, we took the time to speak with a number of different agents and finally settled on going...

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