How do you avoid getting your credit score hit each time you buy a home?

Question

I’m looking to buy five long-term rental properties over the next year. My main concern is the impact on my credit from multiple mortgage applications. Is there a way to minimize or avoid multiple hard pulls while financing these deals?

Jake Yuskaitis · Answer

if you're doing no doc loans a lot of companies will do soft pulls now.

Trevor Higgins · Answer

Great question, just to add too what Jonathan wrote. I've helped and/or encouraged a lot of my investors to look at moving a lot of their revolving lines used for rehab projects over to LLC based credit cards as most of them do not report to personal credit. This can help keep your score higher when doing a renovation.

As far as the inquiry hit, the older and more established your credit becomes, the less of an impact the inquiry will have on your credit. Unfortunately, there is no way to avoid a lender pulling your credit even on DSCR or Commercial loans as you are always going to be a personal guarantor on those loans of which they'll need a credit report to understand your credit-worthiness.

I do have several clients that create partnerships and each partner will take turns being a personal guarantor on loans so that the inquiries are more spread out. This can work when you have partners that you trust and a rock solid Operating Agreement.

Jason Potrzeba · Answer

Lots of good advice here.

I would also suggest that you pick one lender and work w/ them on as many transactions as possible because depending on the timing of your purchases, they may be able to reuse a credit report they already have on you.

Zachary Sneed · Answer

All 3 of these are helpful. Thank you.  So what I am seeing is that its not that big of a deal and to get a good business card with a high line of credit....

Erik Estrada · Answer

Hi Zach,

There are several lenders that only do soft pulls on both long term DSCR and Fix and Flip loans.

Zachary Sneed · Answer

Thanks! I will keep you in mind for the next one.

Trevor Higgins · Answer

@Zachary Sneed yes, there are trusted services out there to help you find 0% business credit cards and maximize your approval limit as well. I'll see if I can find the one a few of my clients have used.

Jeremy Horton · Answer

This is a minimal effect

work on improving your income limit (available credit) and utilization. Increasing your limit will in turn improve your utilization assuming you aren't spending more

I usually apply for a new card every 6 months or so - sure you take a hard inquiry (falls off after 2 years, if I remember right) but the increase in credit limit and automatic decrease in utilization actually results in an improvement in my credit score

Jonathan Taylor Smith · Answer

@Zachary Sneed - Submission of multiple mortgage applications at the time of each purchase should not be an issue for your credit score, as long as you do them all within a short period of time (such as within 30 days). As the credit system allows for "shopping around" for the best rate / terms when making a purchase. But if instead your concern is a credit hit from the accumulation of mortgages as you make each purchase - that impact should be largely offset by the additional rental income that each should bring. But generally speaking, managing your credit score is a common task for real estate investors - especially for those who make use of credit in the purchase and rehab of properties. For example, I have credit cards with $15K to $30K limits that may go from a zero balance to being maxed out when I'm doing a rehab project - and my score will drop accordingly. But the mortgages themselves don't have any major impact. And if doing commercial loans, they don't tend to show up on your credit at all.