Dear Liz: We’re trying to refinance a mortgage. All of the mortgage lenders claim that checking our credit scores will not affect the scores. However, that is not true. What gives? The three credit bureaus all list “too many inquiries” and penalize us. Does calling them do any good or make it even worse?
Answer: Checking your own scores is considered a soft inquiry that has no effect on your scores. When a lender checks your scores, there can be a small ding, but credit scoring formulas also have a feature that reduces the effect when you’re shopping for a mortgage.
Essentially, all the mortgage inquiries made within a certain amount of time are grouped together and counted as one. In addition, the formulas ignore any mortgage inquiries made within the previous 30 days. The amount of time you can shop varies with the credit scoring formula, so it’s generally a good idea to concentrate your shopping into a two-week period.
What you don’t want to do when you’re in the market for a mortgage is to apply for other credit. Those inquiries are not grouped with your mortgage inquiries. The effect of these inquiries fades quickly and is usually pretty small — typically 5 points or less for FICO scores, for example. But even a small ding could cause you to pay more in interest if your scores aren’t already excellent.