Hard Pull Credit Inquiries And How Affects Mortgage Process

This BLOG On Hard Pull Credit Inquiries Was UPDATED On July 17, 2017 

Mortgage loan applicants who for credit, creditors will do hard credit inquiries. Whether consumers are applying for credit cards, furniture credit cards, installment loans, mortgage loans, automobile loan, or any other credit, creditors will do hard pull credit inquiries.

There are two types of credit pulls:

  1. Soft Pull Credit Inquiries
  2. Hard Pull Credit Inquiries

Hard pull credit inquiries will drop consumer credit scores.

Hard Pull Credit Inquiries Drop Credit Scores

Every time consumers apply for credit cards, the credit card companies will do hard credit inquires.

  • Each hard pull inquiries will drop scores by two or more points. 
  • However, the more devastating effect is not the drop in credit scores, but the hard pull credit inquiries will show up on credit record and remain there. 
  • Consumers who decide to apply to a bunch of credit card companies all at the same time, all the hard credit inquires will show up on credit report.

Negative Effects Of Hard Credit Inquiries

Consumers with many hard credit inquiries all at the same time will raise red flags on creditors.

  • They will wonder why credit applicants are applying for a bunch of credit at the same time.
  • This will alert creditors and they will suspect that the consumer are desperately seeking credit.  
  • Although credit scores might not have been affected too much, too many hard credit inquiries will cause suspicion and the chances are that the credit grantor will deny loan.

Strategy In Applying For New Credit

Although hard pull inquiries are not good, this does not mean that a consumer should not apply for new credit.

  • Consumers can apply for a new credit card or department store credit card or gas credit card but do not apply for them all at the same time. 
  • Spread them out throughout many months. 
  • Consumers should not apply for more than 3 new credit tradelines in any six month period. 
  • Avoid in applying for more than 3 new credit tradelines in any 30 day period to limit hard pull inquiry.

Soft Credit Pull Inquiries

A soft credit pull is a credit inquiry that will show up on credit record but will not affect credit scores.

  • Most mortgage companies and banks will do an initial hard pull once and then soft credit pull credit inquiries throughout the mortgage process when borrowers are applying for a mortgage. 
  • Most creditors will understand when they see more than 3 credit inquiries in credit report by a mortgage company within a 30 day time frame.
  • Lenders will assume mortgage applicants are shopping for a mortgage loan. 
  • Make sure if at all possible that when applying for new credit to see if the creditor can do a soft credit pull rather than hard pull.

Credit Inquiries During Mortgage Process

All recent credit inquiries will be questioned by the mortgage underwriter during the mortgage process. Every credit inquiry on the borrower’s credit report needs to be explained.

  • The loan officer can go over with the borrower and write the letter of explanation.
  • The explanation only needs to be a sentence or two long.
  • For example, if the mortgage borrower has a half a dozen of credit inquiries by mortgage companies, all the borrower needs to state is “Shopping For Mortgage”.
  •  Underwriters will also want to know the outcome of the credit inquiry.
  • Underwriters will want to know whether credit was approved or not.
  • Always tell the truth during the mortgage process.

Related> Credit Inquiries Will Hurt Your Credit Scores

Related> Secured Credit Cards To Improve Your Credit Scores

Related> Letter Of Explanation To Underwriters

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

Comments are closed.