How much will inquiries really affect your FICO score?
I am confused about how inquiries will affect a FICO score, especially when someone is shopping with multiple lenders for a home loan. Some say there is no real effect. Others say it can have a negative effect. Can you set the record straight? -Donnie from Nebraska
I have asked Chad Kusner, credit expert and head of Credit Repair Resources (firstname.lastname@example.org), to answer this question which we get quite often. Here is what Chad had to say:
It seems that a leading objection borrowers have when you ask them to complete a full application is: “Don’t pull my credit, I don’t want my scores to drop.” I have had countless conversations about how multiple inquires for home loans affect the borrower’s FICO scores. Some have argued that you only have 14 days to shop, others say 30 days, and some even have indicated that every inquiry counts no matter what the bureaus say. Today I am not only putting the question to bed, I will give you a tool that you can send your borrowers when they disagree.
In short, consumers have 45 DAYS to shop for a home loan. FICO, the leading score provider and sole provider of scores for Fannie and Freddie has done extensive research in order to develop what is called the deduplication window, aka dedupe window, aka shopping window. What this means is that consumers can shop multiple lenders for home, auto and student loans within a 45-day period with the first inquiry being considered the only inquiry that impacts the scores. The information FICO provides on this topic is quite detailed and may confuse those that are not technical. With that being said, I hope you can use this the next time your clients argue that pulling their credit will lower their scores. FICO Deduplication Blog.
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at email@example.com.