Getting Your Credit When Shopping for a Mortgage or Car Does Not Hurt Your Scores

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One of the biggest misconceptions my customers have had in the 12 years that I have been in the mortgage business is that getting their credit report while shopping for a mortgage or a car hurts their credit scores. I also find that first time home buyers are especially reluctant to have their credit report and credit scores pulled because of this belief. Where did they get this misconception? I say this misconception comes from of two things: uneducated mortgage professionals, or deceptive sales techniques.

In the late 1990's, mortgage lenders started relying on credit scores to assist them in deciding whether or not to give someone a mortgage. Coincidently, at that same time the credit scoring system would 'ding' your credit score every time your credit was pulled, no matter who pulled it or for what reason. With the credit scoring system set up this way, it was counterproductive for a home buyer to shop around for their mortgage. Mortgage Loan Officers did tell their home buyers to not allow anyone to pull their credit because back then it really did hurt their credit scores.

There was a lot of criticism of the credit scoring system because the system discouraged consumer from shopping around for the best deals. As a result of this criticism, the credit scoring system was changed to count any number of credit pulls during a particular period of time by different mortgage companies as one credit pull.

The changes made to the credit scoring system were made somewhere after 2002. There are some folks in the mortgage industry that continue to tell consumers about the old rules of the credit scoring system, thus limiting the consumer's ability to shop around for mortgage loan programs. It is hard for me to believe that after several years since these changes being made that loan officers are still telling folks about the old credit scoring system where it hurts the consumer's credit scores if more than one company pulls their credit. I can only imagine this situation in two ways. Either, the mortgage loan officer shouldn't be doing loans because they don't the basics of the mortgage industry, or it is an inappropriate sales tactic employed by some mortgage companies and lenders to capture business.

In either case, a mortgage loan officer telling someone looking for a mortgage to not allow anyone else to pull their credit, improves their chances of landing the borrower's business. This tactic scares the potential homebuyer from shopping around for the best deal, which is contrary to our free market society where we're encouraged to shop around for the best deal. Is it normal, appropriate, accepted, and encouraged, that when you are looking for a mortgage loan program that you do shop around. Part of shopping around is having your credit pulled by multiple brokers and lenders. Additionally, by scaring a potential homebuyer from shopping around, it sets the bar for excessive fees and interest rates to be charged to the borrower. The bottom line here: if you are told by your mortgage broker, "don't let anyone pull your credit" question them. You'll know what to do depending on how they answer you.

If you get your own credit report, you won't hurt your report or your credit scores. If you want to qualify for a mortgage, be sure that you get your credit pulled by a mortgage company. The credit reports that mortgage companies use are designed for mortgage companies that show specific information that the lender is looking for. Although you can get good information with your consumer credit report, the credit report pulled by the mortgage company will be more accurate for assessing your ability to get a home loan and for determines the interest rates you can get. If you want pull your credit and find out your credit scores, you can pull them yourself through the services on GetPreQualified.com. You can go to our Free Credit Report section to order a free credit report.

One last piece of information: you have probably seen advertising for 'Free Credit Report' or some variation of this. This advertising is offering you a free credit report which you are entitled to get every 12 months according the US government. However, when you get this free report you'll find that you don't get a credit score. Credit scores are not free. This is the bread and butter of the credit report industry, so you are going to have to pay for your scores. If you are serious about buying a home, get the full blown credit report with your scores you'll be glad you did.

Dale Stouffer has been a mortgage broker since 1996. Dale owns GetPreQualified.com, a consumer financial services education portal dedicated to real estate financing, mortgage home loans, credit repair.