Rate Shopping Can Hurt Credit Scores
Los Angeles Times (08/05/01) Vol. 20, No. 1 p.C3; Kristof, Kathy M.

Consumers looking for the best deal on a mortgage are often unaware that rate shopping can hurt their credit scores. While credit scorers generally ignore the rate comparison a prospective borrower will likely do when shopping for a home loan, leisurely shopping for rates over an extended period of time can be a sign that the individual is applying for vast amounts of credit. When a borrower consults a mortgage lender and asks for a firm rate, the loan officer will insist on pulling a copy of the borrower's credit report to ensure that he or she qualifies for the lender's best rates. Each time a credit report is pulled in connection with an offer of credit, an "inquiry" is registered on that report; but too many inquiries may suggest that the borrower is in financial straits. Still, rate shopping makes sound financial sense; and credit scorers segregate rate shopping from real credit applications by counting all mortgage loan inquiries made within 30 days as one single inquiry. For this reason, a borrower should try to make inquiries in a relatively short time frame. To avoid being penalized for leisurely rate shopping, consumers can purchase an approximate rate score from www.eloan.com, or pay Fair Isaac or one of the major credit bureaus. Knowing their score in advance, borrowers will already be aware of whether they are eligible for the lowest-rate mortgage products and can thus narrow down their rate shopping.

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