## Mortgage Inquiries: Impact on Credit
### What is a Mortgage Inquiry?
A mortgage inquiry occurs when a lender reviews your credit report to assess your creditworthiness for a mortgage loan. This review is triggered when you apply for a mortgage or pre-approval.
### Hard Inquiries vs. Soft Inquiries
Credit inquiries are classified into two types: hard inquiries and soft inquiries.
**Hard Inquiries:**
* Initiated by lenders when you apply for credit, such as a mortgage or credit card.
* Stay on your credit report for two years.
* Can temporarily lower your credit score.
**Soft Inquiries:**
* Initiated by you or third parties, such as credit monitoring services.
* Do not affect your credit score.
* Used for background checks, pre-approvals, or marketing purposes.
### Impact of Mortgage Inquiries on Credit
Mortgage inquiries are typically hard inquiries, which can temporarily lower your credit score. However, the impact is typically minimal and short-lived.
**Number and Timing of Inquiries:**
Multiple mortgage inquiries within a short period (usually 30-45 days) will be counted as a single inquiry for scoring purposes. This is known as “mortgage rate shopping” and is not penalized.
**Score Drop:**
A single mortgage inquiry can lower your credit score by a few points, typically less than 5 points. The impact is temporary and will disappear over time.
**Long-Term Effects:**
Mortgage inquiries have no long-term negative effects on your credit score. They will gradually drop off your credit report after two years.
### How to Minimize the Impact of Mortgage Inquiries
* **Shop around for rates within a short period:** Compare mortgage rates from multiple lenders within 30-45 days.
* **Use a mortgage broker:** Brokers can gather multiple pre-approval quotes without triggering additional hard inquiries.
* **Limit other credit applications:** Avoid applying for new credit cards or loans while you are shopping for a mortgage.
* **Monitor your credit report:** Regularly check your credit report to ensure there are no errors or unauthorized inquiries.
### Conclusion
Mortgage inquiries typically have a minor and temporary impact on your credit score. By shopping around for rates within a short period and minimizing other credit applications, you can minimize this impact and secure the best mortgage terms.