Credit FAQs | What You Need to Know

One of the biggest topics we hear questions about is how credit scores affect your mortgage rate. Your credit history is a big factor used by lenders to determine the best mortgage for you. Having a strong understanding of how your credit score is involved in the home buying process could be the difference between you and your dream home.

What are lenders looking for with my credit score?

A lender checks your credit score to assess the risk of giving you a loan. A good credit score indicates a low perception of risk, so lenders are more likely to approve a loan at lower interest rates. A bad credit score is an indicator of poorly managed finances, which means more risk associated with the loan.

Your credit score is not the only thing that affects your mortgage rate. However, it is the most important factor you can control.

Will I hurt my credit by getting preapproved for a mortgage?

Having your credit checked is a necessary step to being preapproved for a mortgage or buying a house in general, but a lot of borrowers are afraid of these credit pulls hurting their credit score.

When you have a lender like Chris Doering Mortgages pull your credit, it should have no true impact on your credit score. Credit bureaus know you might be looking for different loan rates from various lenders, they do not penalize you for this. You might notice an effect if you shop for a mortgage while also doing other things that change your credit. This includes financing a new car or getting a new credit card. 

Multiple credit pulls from unlike institutions could signal to credit bureaus that you’re overextending your credit. Be wary of this, negative changes in your credit score can lessen your chances of obtaining the mortgage rate you want. A good rule of thumb is that for similar institutions, you have about 30 days. After that, you might face penalties for multiple pulls.

Identifying and reviewing your credit score is one of the most important things that we do to determine the loan program that fits you best, so it’s important to understand what does and does not affect your credit.

What’s the difference between a hard pull and a soft pull?

A soft credit pull provides lenders with all the information of a hard credit pull, but it cannot be used for lending purposes. Soft pulls are a useful tool for lenders when a borrower starts looking for a mortgage. They help us give you accurate information about what mortgage you qualify for. Soft credit pulls have no effect on your credit score.

The lender performs a hard credit pull at the end of the process when a buyer is under contract to purchase a home. As long as nothing changes between the two pulls, you’re on your way to getting your mortgage!

Why do I get so many phone calls after a credit pull?

If you have received many calls or emails from other companies after a lender checked your credit, you have faced trigger leads. Trigger leads happen when credit bureaus like Equifax, Experian, or TransUnion sell your information after a lender pulls your credit. Thousands of companies buy this data every day.

This can be dishonest and harmful. The callers often pretend to work for a company you know, like Chris Doering Mortgages, to steal your information.

This issue is being talked about in Congress. In the meantime, we encourage everyone to opt out of trigger leads at optoutprescreen.com. There is a simple form you can fill out that prevents the sharing of your information and is effective for several years. You can do this now if you think you could be shopping for a mortgage in the future.

Why is my credit score different from what I thought it was?

It is not uncommon for your credit score to be different from what you expect when a loan officer pulls it for loan qualification. Most consumer monitoring sites like Credit Karma have a unique version of credit reporting. This is a helpful tool for tracking your credit changes over time, but loan officers take more factors into account than these consumer websites.

Many buyers want to know why they don’t have a perfect credit score, especially when they have never missed a payment. You should understand that the credit system does not aim for you to ever be perfect. There are some things you can do to protect your credit score:

1. Maintaining a healthy credit-utilization ratio. This is the percentage of how much credit you’re using when compared to your total available credit limit. Many sources say maintaining a credit-utilization ratio of about 30% is optimal to avoid deteriorating your credit score.
2. Periodically check your credit report through annualcreditreport.com. This will keep you updated on any suspicious changes that you can report quickly to your credit bureau.
3. Follow Chris Doering’s 7 effective tips for protecting your credit.

How can a lender help me with my credit score?

Experts at Chris Doering Mortgage can help you understand your financial situation. They can find any problems and suggest steps to improve your debt-to-income ratio. This will help you get the best interest rates available.

Start your pre-qualification process today and let Chris Doering Mortgage guide you through the entire process.