Q: This question comes from Terri: Is it accurate that I can submit mortgage applications to multiple banks simultaneously without causing a major hit to my credit score?
A: Yes, that's correct. Understanding this is key. Your credit score is influenced by five main factors: timely bill payments, credit usage, credit mix, length of credit history, and new credit applications. When you seek new credit—like a mortgage, car loan, or credit card—it can signal to lenders that you might be in financial distress. Consequently, frequent applications can raise concerns about your ability to repay debts.
Every application can slightly lower your credit score; while this effect is minor compared to factors like payment history and credit utilization, it's wise to keep it minimal. Comparing mortgage options, especially with today's higher interest rates, is crucial for home buyers. Fortunately, if you apply to several mortgage lenders in a specific timeframe, those credit checks only count as one inquiry. This timeframe varies between credit scoring models, typically ranging from 14 to 45 days. For instance, the latest FICO models allow for a 45-day window to shop around, while VantageScore limits it to 14 days. To avoid penalties, aim to submit all applications within a 14-day span.
One last tip: while you're exploring options, avoid applying for any other types of credit. Don't be tempted by store credit cards offering discounts or new rewards cards until your mortgage is secured. Plus, checking your own credit won't impact your score at all.
