How NOT to affect credit score by applying w/ multiple lenders

Question

Hi BP,

Maybe we chalk it up to the "cost of doing business" when applying for loans with multiple lenders to find the best deals on financing, but what are some rules of thumb to try to avoid getting multiple hits to your credit score when applying for loans?  I have a FICO around 820, so I already know I am eligible for top tier rates with conventional banks, but I'd like to see if that score can get me some special deals on low or no money down loans that perhaps only the unconventional lenders can offer, but they would have to run my credit.

Thanks

Russell Brazil · Answer

For scoring purposes hard inquiries within 30 days from mortgage lenders are grouped together as 1 hard pull.

Where did you get your score from? It is important to note that FICO has many scoring algorithms and the score from say your credit card is a different algoritihim that the lenders use. It can vary as much as 40 or 50 points from one algoritihim to the next.

Also with each algoritihim there is a separate score based off of each of your 3 credit reports. Lenders use the middle of those 3 scores.

Andrew Postell · Answer

@Roger P. I would suggest limiting your shopping to a 14 day window.  You can absolutely get preliminary numbers from a bank before checking your score officially.  If the bank is unwilling to do that it's probably a good sign to look elsewhere.  When you have your 2 or 3 banks you want to compare then have them all check your credit on the same day.  Most lenders will even match other lenders offers.  So shop and compare and get your credit checked on the same day if possible.  That way the rates/fees they show you are all from the same pricing on that day.  That's the best method to comparing.  Feel free to ask more questions.  Thanks!

Roger P. · Answer

Thanks @Russell Brazil and @Andrew Postell !  Good info.  I did not know mortgage credit checks were lumped into one hit if they are done within a short period of time.  Years ago when I applied for financing for a vehicle, I told the dealer to use my personal bank only for financing for the credit check, but a couple weeks later I noticed on my credit that they ran checks with four different lenders in that one day and all of them showed up on my credit report.  Perhaps the rules are different with auto loans, but I have been scared to have anyone run my credit after that experience ;)

As far as my credit score goes, between free viewing from the three different bureaus, free "FICO" scores from two credit cards, and Credit Karma, they were all different between 806 to 838 last month, so I just averaged a round number at 820.  But to your point Russel, when I rolled a HELOC into a mortgage a few years ago, I did notice the credit score they used was on the lower end of where I "thought" my score was based on the free scores I was viewing from other sources.

Thanks again for the tips, fellas!