One of the first things that JMAC’s brokers do when taking an application is run a credit report. Just like a doctor checking blood pressure, or a car mechanic checks the engine, it is good for our brokers to know what is going on under the hood. But there is a great deal of misinformation regarding credit scores. As a result, JMAC’s brokers tell us that some clients are overly cautious for any credit report being pulled. Maybe it is like receiving too many x-rays at the dentist!
In order to obtain a home loan or refinance, lenders acquire a "tri-merge" report, meaning it combines reports from TransUnion, Equifax and Experian and provides the credit scores from all three bureaus. Our brokers know that this specific type of credit report is necessary in order for JMAC to obtain approval for a Fannie or Freddie loan via its AUS system, which in turn allows preapproval.
The impact on a borrower’s credit scores is dependent upon the type of inquiries. The models used to determine credit scores have built in a tolerance for multiple inquiries for different lenders in the mortgage and auto loan industries. This is because it is not unusual for someone looking to buy a car or home to speak with more than one lender, and each will want to obtain their own credit report. As a result, if a client has spoken to two other lenders within the past week couple of weeks, the credit scores should be the same as the scores with the preceding lender
The type of inquiries that will have a negative impact on one’s credit scores are for consumer, or revolving, debt inquiries such as credit cards and department store cards. If a borrower has multiple inquiries from different credit card companies and/or department stores, it appears they are seeking credit from anywhere. This type of behavior is seen as a negative and will impact the score.