Mortgage Credit Score Tips – Part II

homes-2Mark James
Sales Manager
NMLS 247356
Guild Mortgage Company
(808) 744-6420

Be not dismayed by the credit reporting maze…a good Loan Officer can guide you through it. Thanks to information from Devin Norcross of National Credit Care, who visits Hawaii often, we can provide you with several explanations of how FICO and credit scores are calculated.

The difference between a “hard pull” and a “soft pull”

Hard inquiries (hard pull) occur only when YOU ARE APPLYING FOR MORE DEBT.

Soft inquiries (soft pull) are all others. The largest quantity of soft inquiries comes from your current, existing creditors performing routine credit checkups. You may not know about this because it’s in the fine print the average person does not read when signing a contract with a creditor.
homes-3
A soft inquiry will not cause a point reduction in your credit report.

A hard inquiry, on the other hand, is going to occur when you apply for anything from a gas card to a mortgage loan. Additionally, if you apply to have your credit limit increased on your credit card, that will be a hard pull versus a soft pull when your creditor does the checking on their own.

When qualifying for a mortgage, every point counts, especially the 2-5 point deductions that the average hard inquiry creates.

Shopping windows

One of the biggest myths about credit scores is that the consumer can apply to different institutions who pull their credit (hard pull) without the average 2-5 point deduction in scores. Nearly all commonly used credit scoring models have no shopping window allowances at all.

This shopping window rumor started back in 1997 when FICO scores were first introduced for mortgage lending. Long story short, when you are applying for credit, your scores are going down. This situation can be avoided by limiting who is allowed to run your credit during the mortgage pre-approval process. If your scores go down unreasonably, it may be that the inquiry was not processed correctly by the big repositories, Equifax, TransUnion, and Experian. You will need professional help to correct this.

For more information please call Guild Mortgage Company Kailua Branch, 609 Kailua Road #200, Kailua, HI 96734 at 263-4622, Waikele Branch, 94-849 Lumiaina Street, Waipahu, HI 96797 at 369-7098, or our Honolulu Branch, 677 Ala Moana Boulevard Suite 708, Honolulu, HI 96813 at 744-6420.

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