What Does and Doesn’t Affect Your Credit Score When Applying for a Mortgage

Who knew that the actions you take when applying for a mortgage can hurt your credit score? Apparently, not many, and for those who do, there’s some confusion over what does and doesn’t affect it. Based on recent surveys, here’s what the experts say.


When you apply for a mortgage or loan, the lending institution will naturally check your financial character, status and background to evaluate your qualifications. And the best way to do this is to ask for your credit report. The more companies you apply at, because you are looking for the best deal, the more inquiries are generated. Inquiries, depending on type and timeframe, may or may not influence your credit score. This is how it works:

Inquiries, or checks, come in two types: the hard and the soft. While both allow a lender or you to see them, their effects on your credit score are not the same.

The hard credit checks are inquiries requested by lending firms and credit card companies. They do so because you applied for a loan or credit card from them. They need your authorization to ask for the inquiry. Soft credit check requests come from you, companies offering you pre-approved loans or credit cards and employers doing background checks.

Renting a car, applying for a lease on an apartment, requesting for a credit limit increase or a cell phone contract can be hard or soft inquiries. Some companies, depending on their policies, will ask for one if you’re using a debit card instead of a credit card..

Hard credit inquiries have a negative effect on your credit score. According to FICO, one hard inquiry will deduct around five or less points from your score. If you are shopping for rates for a car or home mortgage, advisers recommend doing so within a 14-day period since all inquiries in that timeframe will be counted as one. Another tip is to fill up application forms only when you have decided to take out a loan so you don’t prompt another hard credit check three or six months later.

Soft credit checks requested by you or a prospective employer will not affect your credit score. In fact, a 2016 survey found that people who conducted several personal credit checks on themselves raised their credit scores.

Credit record inquiries are not the misconceptions people have about credit scores and applying for a mortgage. Here are two more of them:

  1. Closing old and inactive credit cards will have a positive effect on your credit score.

On the contrary, it’s the old but in good status credit cards that build your credit history, which makes up 15% of your credit score. They also increase your debt-to available credit ratio, which is a good thing. So keep the credit cards you’ve had for years, use them once in a while and pay them on time.

On the other hand, opening several new credit lines simultaneously can hurt your credit score as it will give the impression that you will possibly go on a borrowing binge and have difficulty making your payments after.

  1. Having a criminal record will have a negative impact on your credit score.

Criminal records have no place in your credit score, which contains your payment history, outstanding debts, types of credit, how long your credit history is and account inquiries requested. But if you have unpaid restitutions for a victim arising from criminal charges, they will appear on your credit record and bring your score down. A DUI attorney in Phoenix, which has tough DUI laws, says court-ordered payments can be so high as to put you in debt for a long time. So, while a criminal record may not affect your credit score when applying for a mortgage, the debts incurred from a settlement or conviction can put you in financial difficulty.

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