Protecting Your Credit while Comparison Shopping for a Loan
Smart shoppers do their homework and compare prices before making a purchase. In the past, some homebuyers or car shoppers might have limited their comparison loan shopping, fearing too many hard inquiries on their credit report in a short amount of time would adversely affect their credit scores.
While the number of hard inquiries you have is often a factor in many credit scoring models, it is still possible to comparison shop for a loan without dinging your credit. First, many credit scoring companies have adjusted their scoring models to accommodate comparison shopping. Still, it’s a good idea to avoid adding lots of unnecessary inquiries to your credit file.
The Internet has made comparison shopping easier than ever, even for consumers hunting for a mortgage or vehicle loan. Many aggregating websites will give you “ballpark” estimates of loan terms and costs from multiple lenders based on information you provide – without making a hard inquiry into your credit report. Lenders often advertise their current mortgage or vehicle loan rates. Be sure to read the fine print on these offers and ads to better determine if you meet the lender’s criteria for the preferred rate or special offer.
You can also talk directly to lenders and ask them to cite a range that your loan might fall into based on some basic information you provide. If you explain your circumstances – that you’re trying to preserve your credit scores – and acknowledge that you understand they can’t make any firm offers without a complete application and credit review, they may be able to give you some preliminary numbers to work with.
Remember, no one can legally check your credit report without your permission. Don’t provide your Social Security number and authorization to any lenders until you’re confident that you’ve found one or two very good options for your needs. When you’re ready to apply for a loan, limiting hard inquiries to just a few potential lenders can help minimize the impact of hard inquiries to your credit report and scores.