How to Shop for a Mortgage in St. Louis
As with anything you buy, you want to shop around and make sure you get a good deal. But will having too many lenders look at your credit report actually hurt your credit score and thus your mortgage chances? Usually no, but there are a few things you should know.
Here is how to shop for a mortgage in St. Louis.
Credit Scores and Reports
The three bureaus – TransUnion, Equifax and Experian – control your credit scores. Each month, your lender will report your financial activities such as loan and credit card repayments. They keep track of your score and change it depending on:
- What your credit card balance is and the credit limits you have
- The number of credit card accounts you have and how long they’ve been open
- Late and on-time payment history
- The number of inquiries on your report
Too many inquiries at one time may lead these bureaus to dock your credit score. Each time you open a credit card account, the lender makes an inquiry. If inquiries happen frequently, then your score will drop.
Mortgage and car inquiries are less impactful because the bureaus expect you to shop around for a good mortgage. Since you’ll only be buying one mortgage in the end, they don’t dock you for every inquiry made. Instead, they lump all of them into one solid inquiry.
You will still lose a few points for an inquiry, but it won’t be nearly as costly, and it’ll be more of a one-time thing.
How to Avoid Damage
All three bureaus score credit in different ways. They update their processes all the time, but it’s hard to know who is on what schedule. Some bureaus don’t duplicate multiple mortgage inquiries within a 14-day period, which means that if you go to three different lenders who then make inquiries, it still only counts as one. After that period, any other mortgage inquiries will result in a penalty and start a new 14-day period. Other bureaus have a longer period, such as 45 days instead of 14.
You probably want the 45-day period, but it’s hard to know which bureau is using this.To avoid additional penalties, stick with the 14-day period and get your mortgage shopping done all at once.
Running Credit Yourself
Sure, you may be able to check your own credit report, but lenders are required by federal law to check the report themselves, so you won’t be saving your lender extra time. At best, having your credit report can get you an initial estimate from a lender, but you won’t have the real numbers until the lender runs a credit check.
That’s not to say you shouldn’t check your credit report (you’re allowed one free run a year). This is a great way to monitor your score and look for any problems before you apply for a mortgage. If you see problems, you can get them sorted out before the lender looks at your score. You can also work on improving your score before you go to a lender.