How much does a “hard pull” hurt my credit score?

Your credit score is one of the main tools a lender will use in determining whether they want to lend you money, and at what interest rate. Your FICO score is determined by a number of variables (learn about them here), including how many times in the recent past other lenders have requested your credit report or credit score.

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If you’re a smart borrower, you’ll shop loans before signing. This is because all lending institutions have slightly different rules for approving you (learn about the finer points of qualifying for a mortgage), and different ways of calculating your interest rate. If you settle with the wrong lender, you could pay tens of thousands of dollars more over the life of your mortgage than if you borrow from someone better suited for your situation.

Credit Score

The downside is that any time you approach a lender, they need to “pull your credit”, or get a copy of your credit report and/or FICO score before they can give you a rate. They might be willing to give you a tentative rate based on the FICO score you think you have, but they’ll always need to see it directly from the credit bureaus before they finalize anything. When your credit is run for purposes of issuing a loan, a “hard pull”is recorded with the reporting agency they provided the information from. If you have a ton of hard pulls, it will look to lenders like you’re getting ready to take on an excessive debt burden, and your FICO score will suffer. In fact, 10% of the total FICO calculation is based on recent hard pulls, so if you’ve been shopping the wrong way, it could really ding you.

Beating the hard pull

It’s common sense that someone shouldn’t be dinged for shopping a loan–getting a number of quotes is simply good business (and implies you’ll wind up with a very affordable loan). So the credit bureaus treat all hard pulls within a certain period of time as only one inquiry. In the current version of FICO (the complex formula is constantly being reworked to provide the most meaningful score), that period is 45 days. Some lenders might still be using an old formula, however, which only gives a 14-day window in which to log all the hard inquiries without them stacking up on you.

Since even one hard pull can affect your score by several points, and potentially require you to pay a higher rate in spite of the inevitable, FICO doesn’t even consider pulls that are less than 30 days old.

credit scoreIf you’re loan shopping but are concerned about hard pulls affecting your rate, simply get them all done at the same time. Talk to your lenders, get tentative offers based on what you think your score is, and allow for slight surprises (it’s fairly rare for a consumer to have the same credit score from all three bureaus). Lenders will typically pull all three scores and use the middle (median) one. Some will take a mean of the top two, but if any two scores are identical, that will probably be the number they use. Each lender has their own rules for underwriting, and how to quantify your past borrowing behavior is up to each lender.

Learn about what other factors affect your interest rate

So after you have your lender candidates lined up, have each of them pull your credit at the same time. All the pulls will be treated as one, and won’t even take effect until the deal is done. This simple practice will get you the best interest rate possible.

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AMCAP Mortgage LTD. – NMLS# 129122
9999 Bellaire Boulevard, Suite 700 Houston, Texas 77036
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