Damage-Proof Your Credit

Believe it or not, applying for a home loan can negatively affect your credit rating. How does this happen? When you apply for a home loan or refinancing loan, the lender checks your credit report to see if you have an acceptable credit rating. This helps them determine whether or not they should accept your application and offer you a loan. Any credit checks or “credit inquiries” that occur as a result of you applying for a loan appear on your credit report and can affect your credit score.

The problem is that if your credit report is checked too many times during a short amount of time, this can decrease your credit score—especially if you are not accepted for a loan shortly thereafter. Fortunately, the Consumer Protection Act passed by Congress has modified the way credit is scored.

The newer statute allows for a fixed window in which you can have your credit checked numerous times. As a result, your score will not drop as a result of mortgage inquiries made on your report 30 days before scoring. That means you have 30 days to shop around for the best rates and find a loan before your score will be affected.

Although this new law is definitely an improvement, there are still some precautions you should take. If you’re planning to apply online for a home loan, you should take the following steps to ensure your credit isn’t damaged in the process.

1. Before you start searching for a loan, request a free credit report so you can check your score and make sure everything is accurate.
2. If your find any errors in your credit report, you should dispute these items. Contact each of the three major credit bureaus to learn how you can have these mistakes removed from your report.
3. Before applying for a loan, pay off as many bills as possible and don’t make any major purchases. (For example, you shouldn’t apply for a car loan or credit card at the same time that you’re applying for a home loan.)
4. Shop around for the best rates, and choose only four or five lenders.
5. Be honest. Let the brokers and lending institutions know that you are shopping around for a loan. The best lender will go out their way to win you over with a low interest rate and excellent service.
6. Once you’ve been offered a loan, finalize your new mortgage as soon as possible.

To obtain a copy of your credit report contact:

• Equifax:

• Experian:

• Trans Union: