Will Multiple Credit Inquiries Hurt FICO scores? Marina del Rey Real Estate

Fair Isaac Corp., developer of the FICO score, has protections in place to avoid lowering the scores of people shopping for mortgages, but these aren’t always effective.

WASHINGTON — In a marketplace where lenders are demanding record-high FICO credit scores — Fannie Mae and Freddie Mac are averaging around 760 on approved mortgages this year — are you a little fuzzy about what can push your scores up or down?

Take inquiries, which Fair Isaac Corp., the developer of the score methodology dominant in the mortgage field, says are among the most widely misunderstood components of its system. Do multiple inquiries — requests by lenders and others to pull your national credit bureau reports — knock your score down? Do you know whether your lender is entering the correct code to minimize damage to your score when you’re shopping for a mortgage and generating lots of inquiries? If you’re young or otherwise new to the world of credit, could multiple inquiries do enough damage to prevent you from getting approved for a home purchase?

Given the importance of maintaining high scores, FICO senior scientist Frederic Huynh agreed to run through the key rules governing how inquiries affect home buyers and mortgage applicants.

Start with the basics: Yes, racking up large numbers of inquiries can lower your score. The FICO models consider them significant because extensive behavioral research has shown that “consumers who are seeking new credit accounts are riskier,” more prone to defaults, Huynh said.

“Statistically people with six or more inquiries on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports,” he said. So inquiries do matter.

  • But this doesn’t mean that if you’re shopping for a home loan or refinancing, and six lenders pull your credit reports, that you’re going to be hit with six separate inquiries and have your score lowered. The FICO models, Huynh said, ignore all mortgage-related inquiries during the 30 days immediately preceding the computation of the score. All mortgage inquiries during the 45 days preceding your loan application count only as a single inquiry. The same buffer zones cover shopping for auto loans and student loans — but no other forms of credit.

In any event, Huynh said, a single inquiry usually is not a big deal, knocking less than 5 points off your score per pop. But experts in the credit-reporting field say that despite FICO’s good intentions, bad things can happen on inquiries. This is especially true for people with thin credit files, such as young, first-time home buyers and others without extensive credit histories.

Larry Nelson, owner of KCB Information Services in Pekin, Ill., a credit reporting agency active in the mortgage field, said a recent applicant lost her pre-approved home loan at closing because five new inquiries for an auto loan suddenly appeared on her credit reports. This deflated her FICO score to 610 — a loss of 30 points — and put her below the minimum score required for the mortgage.

How could this happen, since auto loans are one of the three protected classes of credit where multiple inquiries within a short time period are OK? According to Nelson, unless loan officers properly code the purpose of the inquiry when they report it to the national credit bureaus — an auto loan in this case — it won’t necessarily be identified in credit files that way.

Nelson’s home buyer had double bad luck: None of the inquiries that should have been covered by the 30-day buffer carried the correct purpose identification. Plus Fannie Mae and Freddie Mac have begun requiring lenders to pull a second set of credit reports immediately before closing to ensure that applicants’ FICO scores haven’t changed significantly. In this case, there was a sudden increase in score-injuring inquiries in the bureaus’ files, and the buyer couldn’t close on the loan.

Nelson said glitches like this “are becoming more commonplace” and can hurt unwary consumers. He strongly urged mortgage applicants to avoid all credit-related shopping — for credit cards, furniture, home improvements, you name it — in the weeks before their closing because a string of inquiries can knock the home purchase off track or delay it.

Of course, not all inquiries indicate active credit seeking, Huynh said, even though your files are accessed. For example, if you’re checking on your credit before applying for a mortgage — either throughhttp://www.annualcreditreport.com, where reports are free once a year — or by simply buying them from Equifax, Experian or TransUnion, your FICO score goes untouched.

Distributed by Washington Post Writers Group.

  1. 2 beds, 2 baths
    Home size: 1,714 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 3
  2. 2 beds, 3 baths
    Home size: 1,780 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 4
  3. 1 bed, 1 bath
    Home size: 1,200 sq ft
    Lot size: 1.83 ac
    Year built: 2008
    Days on market: 5
  4. 3 beds, 2 baths
    Home size: 1,870 sq ft
    Lot size: 1,870 sqft
    Year built: 0
    Days on market: 6
  5. 3 beds, 2 baths
    Home size: 1,932 sq ft
    Lot size: 1.97 ac
    Year built: 1967
    Days on market: 8
  6. 3 beds, 3 baths
    Home size: 2,217 sq ft
    Lot size: 12.37 ac
    Year built: 1980
    Days on market: 10
  7. 1 bed, 1 bath
    Home size: 992 sq ft
    Lot size: 2.86 ac
    Year built: 2003
    Days on market: 11
  8. 2 beds, 3 baths
    Lot size: 11,096 sqft
    Year built: 1970
    Days on market: 11
  9. 2 beds, 3 baths
    Home size: 1,993 sq ft
    Lot size: 2.86 ac
    Year built: 2003
    Days on market: 12
  10. 2 beds, 3 baths
    Home size: 1,582 sq ft
    Lot size: 1.70 ac
    Year built: 1966
    Days on market: 12
  11. 2 beds, 3 baths
    Home size: 1,990 sq ft
    Lot size: 27,349 sqft
    Year built: 2010
    Days on market: 12
  12. 2 beds, 2 baths
    Home size: 2,184 sq ft
    Lot size: 12.37 ac
    Year built: 1980
    Days on market: 24
  13. 3 beds, 4 baths
    Home size: 2,348 sq ft
    Lot size: 3,033 sqft
    Year built: 1993
    Days on market: 27
  14. 5 beds, 6 baths
    Home size: 6,083 sq ft
    Lot size: 3,641 sqft
    Year built: 1987
    Days on market: 31
  15. 2 beds, 2 baths
    Home size: 1,584 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 32
  16. 2 beds, 2 baths
    Home size: 1,422 sq ft
    Year built: 1972
    Days on market: 32
  17. 3 beds, 3 baths
    Home size: 1,650 sq ft
    Lot size: 2.41 ac
    Year built: 1978
    Days on market: 35
  18. 2 beds, 1 bath
    Home size: 864 sq ft
    Lot size: 2,660 sqft
    Year built: 1937
    Days on market: 38
  19. 2 beds, 3 baths
    Home size: 1,900 sq ft
    Lot size: 18,534 sqft
    Year built: 1971
    Days on market: 40
  20. 2 beds, 2 baths
    Home size: 1,391 sq ft
    Lot size: 4.47 ac
    Year built: 1979
    Days on market: 45
  21. 4 beds, 4 baths
    Home size: 3,891 sq ft
    Lot size: 3,136 sqft
    Year built: 1989
    Days on market: 46
  22. 2 beds, 2 baths
    Home size: 1,050 sq ft
    Year built: 2016
    Days on market: 48
  23. 2 beds, 2 baths
    Home size: 1,220 sq ft
    Lot size: 1.36 ac
    Year built: 2007
    Days on market: 52
  24. 3 beds, 3 baths
    Home size: 2,850 sq ft
    Year built: 1970
    Days on market: 52
  25. 1 bed, 2 baths
    Home size: 1,791 sq ft
    Lot size: 2.82 ac
    Year built: 1999
    Days on market: 53
  26. 1 bed, 2 baths
    Home size: 1,670 sq ft
    Lot size: 39,560 sqft
    Year built: 2006
    Days on market: 56
  27. 5 beds, 6 baths
    Home size: 6,200 sq ft
    Lot size: 3,826 sqft
    Year built: 1998
    Days on market: 59
  28. 1 bed, 2 baths
    Home size: 1,088 sq ft
    Lot size: 2.86 ac
    Year built: 2003
    Days on market: 62
  29. 2 beds, 2 baths
    Home size: 1,714 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 63
  30. 2 beds, 2 baths
    Home size: 1,714 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 66
  31. 3 beds, 2 baths
    Home size: 1,722 sq ft
    Year built: 1972
    Days on market: 67
  32. 3 beds, 2 baths
    Home size: 1,722 sq ft
    Year built: 1972
    Days on market: 67
  33. 2 beds, 2 baths
    Year built: 0
    Days on market: 70
  34. 3 beds, 3 baths
    Home size: 2,652 sq ft
    Year built: 1972
    Days on market: 71
  35. 5 beds, 6 baths
    Home size: 5,034 sq ft
    Lot size: 2,890 sqft
    Year built: 2000
    Days on market: 84
  36. 2 beds, 3 baths
    Home size: 1,945 sq ft
    Lot size: 2.82 ac
    Year built: 2000
    Days on market: 85
  37. 4 beds, 4 baths
    Home size: 4,245 sq ft
    Lot size: 3,150 sqft
    Year built: 1985
    Days on market: 86
  38. 2 beds, 3 baths
    Home size: 2,315 sq ft
    Lot size: 9,270 sqft
    Year built: 1976
    Days on market: 94
  39. 4 beds, 5 baths
    Home size: 3,298 sq ft
    Lot size: 4,385 sqft
    Year built: 1986
    Days on market: 101
  40. 3 beds, 2 baths
    Home size: 1,870 sq ft
    Year built: 0
    Days on market: 109
  41. 3 beds, 2 baths
    Home size: 1,722 sq ft
    Year built: 0
    Days on market: 112
  42. 3 beds, 3 baths
    Home size: 3,237 sq ft
    Lot size: 8,467 sqft
    Year built: 2000
    Days on market: 117
  43. 4 beds, 4 baths
    Home size: 4,805 sq ft
    Lot size: 3,049 sqft
    Year built: 1999
    Days on market: 123
  44. 4 beds, 4 baths
    Home size: 1,838 sq ft
    Lot size: 3,499 sqft
    Year built: 1953
    Days on market: 143
  45. 1 bed, 2 baths
    Home size: 2,300 sq ft
    Lot size: 1.06 ac
    Year built: 2007
    Days on market: 180
  46. 2 beds, 3 baths
    Home size: 1,560 sq ft
    Lot size: 31,646 sqft
    Year built: 2006
    Days on market: 189
  47. 4 beds, 6 baths
    Home size: 6,539 sq ft
    Lot size: 4,633 sqft
    Year built: 1989
    Days on market: 205
  48. 3 beds, 4 baths
    Home size: 3,140 sq ft
    Lot size: 27,007 sqft
    Year built: 2010
    Days on market: 206
  49. 2 beds, 2 baths
    Home size: 1,450 sq ft
    Year built: 0
    Days on market: 471
  50. 3 beds, 2 baths
    Home size: 1,644 sq ft
    Lot size: 5,991 sqft
    Year built: 1958
    Days on market: 658

See all Real estate in the city of Marina Del Rey.
(all data current as of 12/11/2017)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

kenharney@earthlink.net

Similar Posts:

Leave a Comment