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Topics addressed on July 22, 2009:
Impact of inquiries is minimal when shopping for a mortgage
We have looked at a foreclosure property and have submitted an offer. Our mortgage credit score was 820. The problem is that the bank is handling the foreclosure sale as an auction, so I have no idea where we stand since there are several bidders. If we don't get this property then we will need to have our credit checked later by another bank. How will these two checks affect my credit score?
You don’t need to worry about your credit score if it is already very strong. Although much is said and written about the impact of inquiries, they really are of minor significance for most consumers.
Also, both of your inquiries were for a mortgage, which means they have even less significance. Because consumers typically shop for the best deal for a mortgage or an auto loan, most scoring models have special rules to account for the fact that the activity relates to only one financial transaction. For example, multiple inquiries for a mortgage loan within a short period, typically 14 days, are counted as one inquiry. That minimizes any impact on your credit scores.
Even if you have another inquiry outside of that time frame, the point difference caused by an inquiry will always been relatively small.
An inquiry is a record that someone has accessed your credit report. Inquiries can represent credit risk because they indicate you may have a new debt that doesn’t yet appear on your credit report as an account. So, lenders have no way of knowing if it is a large debt or small debt, or even if there is a new debt at all.
If your scores were already low, reflecting missed payments or high debt, then dropping even a few more points could cause you to be declined for new credit or affect your terms. But, if you are having problems managing your credit and now you have applied for another debt, there is a strong risk that you won’t be able to repay it. Furthermore, taking on another debt could make it even harder for you to repay the debts you already have.
On the other hand, if you have a strong credit history, the impact of an inquiry on your credit scores won’t be significant enough to cause you to have problems qualifying for the credit you want. Since you have always managed your credit well, you will likely manage this new credit well, too.
Continue your good credit management and you will be able to get the new home you are looking for. I hope this one turns out to be the perfect one.
Thanks for asking.
- The "Ask Experian" team