Beginner's Information: December 2006 Archives

>broker incurred 19 inquires in 1 week dropping my score.



B.S.



I'd go the full Penn and Teller on this one if I wasn't trying to stay family friendly. The law is clear on this one, and practice is fully compliant with the law. I've seen thousands of credit reports, sometimes with dozens of recent mortgage inquiries. It could be 1, 19 or 19,000 inquiries. As long as they are all mortgage inquiries, all inquiries within thirty days count as one one inquiry. And the credit reporters and credit modelers I'm familiar with all comply.



Now, the best and the worst loan officers are brokers, who shop your loan around to multiple lenders. But you don't even have to stick with one broker, and you are silly to do so. Shop your loan with half a dozen at least, and apply for two or more. As long as you control the appraisal, the most you'll pay is a retyping fee, and you can play them off one against the other to see which delivers the most of what you want the fastest.



This used to be a real issue. Years ago, there would be a game as each inquiry was a hit to your credit, so prospective mortgage providers would run your credit again and again, until they drove your score under some noteworthy creditworthiness break-point. They could still use their original report, but since anybody who ran your report after that would see a 678 instead of a 686, or a 572 instead of 588, it would be unlikely that they could provide as good a loan.



However, a few years ago the National Association of Mortgage Brokers sponsored legislation in Congress to change this. It was hardly altruistic of them, people not having their score hurt by multiple inquiries means that they are more willing to allow brokers a chance to compete. Nonetheless, this was a major benefit for anyone who wants to be able to shop around for a mortgage like they might want to for any major purchase, and mortgages are the second biggest purchases most people make in their lifetime (the biggest being the property the mortgage loan secures!). No matter how selfish the motive, however, they still did you a major favor, as someone who might want to have a mortgage someday even if you don't now. Tell your mortgage broker thank you for that.



Now there is a limitation to this, and ironically it affects credit reports run at banks and credit unions, although not brokers. Because in order to qualify for this, the inquiry has to be run under a provider code that says, "inquiry for mortgage." Mortgage broker inquiry codes all say "inquiry for mortgage," because that's the only type of credit they've got. But banks and credit unions give loans for other purposes also, so they have a minimum of two inquiry codes, one that says "mortgage inquiry," and one that says, "general inquiry." If you are talking to a loan officer at a bank, who does car loans and credit cards also, sometimes they use the wrong inquiry code, and it counts as another inquiry. Talk to four banks, potentially four inquiries. Talk to four brokers, unless you space them out by 30 days or more, it's never more than one inquiry.



So anybody who tells you not to let other mortgage providers run your credit because they might drive your score down is either unaware of the law, or simply trying to scare you because they are frightened of having to compete. Incompetent or a liar, one or the other - maybe both. When you get right down to it, they are really telling you that their loans aren't very good. Because so long as they are done within a few days, the fact is that any number of mortgage inquiries all count as precisely one inquiry.



Caveat Emptor.