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Established Member
Posts: 26
Registered: ‎03-03-2010
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How does applying for loans affect my credit score

I know that I've read that if I want to check my own credit scores than it has no negative impact on my credit scores.  However I'm interested in applying or gettting preapproved for a loan,  SOLELY for the purpose of seeing what I can get approved for today (I won't actually need a loan until next year).  Just for example, ING Direct whom I have a savings account with has a home loan application tool that lets me enter my financial data/etc and lets me know if I will be approved.  Do these kinds of things/inquiries affect my credit score?  Or should I go to a physical bank or lender and talk to them and see what they tell me I can borrow?  I have a lot of financial decisions to make before the end of the year - including leaving my current job for a higher paying one if necessary, paying off my car loan entirely, borrowing against my 401K for extra downpayment $$, etc etc.  SO, I need to know where the best way to find out where I am right now and what they will lend me if I wanted to buy today (I'm assuming it would have to be a lender in my city since it varies from city to city), but at the same time I don't want to do anything to hurt my excellent credit scores that I currently have (750+).

Senior Contributor
Posts: 3,299
Registered: ‎04-22-2008
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Re: How does applying for loans affect my credit score

Applying for a loan will give you a hit to your FICO score.  Typically it is not too big (maybe 5-10 points), but in certain situations it can be a bit more.  This is mor elikely if you have a few recent inquiries and as a whole it makes you look like you are out looking for alot of credit.  Anyway, 1 inquiry will not usually hurt you too bad.

 

Changing jobs is generally not a good idea.  If it is in the xact same filed and position it is not too big of a deal, but lenders still prefer stability.  If it is a different field or different type of position, then they usually want you to be on the job in the current position for 2 years to count the income.

 

Also, it can be useful if needed to use a 401K for down payment, etc, but i would recommend against it unless absolutely necessary.  They will count that towards reserves so it will help your application even without withdrawling it and paying the fees and/or the hassle.  It is much easier to take money out of retirement than to replace it, especially when adjusting to the cost of new homeownership.

 

In any case, good luck.

Member
Posts: 12
Registered: ‎05-16-2007
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Re: How does applying for loans affect my credit score

JUST From personal experience, I can tell you that applying for loans will NEGATIVELY impact your credit scores. A few lenders and Brokers claim they can actually pull your credit report without it negatively affecting your scores. However, I have never, personally seen such end result.

 

Without damaging your credit, perhaps the safest way to find out where you are right now and what or how much you can qualify for, is to get a detail recent copy of your credit report and scores when you are ready. Take it with you to the bank/lender/broker you intend to use. Make sure you have your other information with you such as W2s, 2 most Recent Pay Stubs, Tax returns etc. Be sure to tell them NOT to pull your credit report. I have seen this work in the past.

 

SOME will give you a pretty solid estimate others will insist on actually pulling your credit before giving any information on what you are seeking. Oftentimes the resistance come because people simply don’t trust the credit report that you present, or sometimes you end up dealing with a newbies/rucky in the business.

 

ANY hard enquiry, as a result of applications you voluntary initiated for credit, such as credit card or mortgage enquiry will remain on your credit files for 12 months. These voluntary, or "hard", inquiries are the only credit inquiries that count towards your credit score. When you review your credit report, you might notice that several inquiries appear from businesses to which you didn’t apply for credit. Other businesses might check your credit report because they want to offer goods and services to you. For example, creditors who send “pre-approved” credit card offers have often checked your credit report first.

 

In 2005 searching for a construction loan, plus a refinance I ended up with 12 inquiry on my report in less than one year. I went to 4 place and they were sending my application to third parties left right and center. I eventually dispute it down to 6 enquiry. Too much recent enquiry convey the impression, to lenders, that you are on the prowl to assume new debt/credit or you are facing some type of financial difficulties, which isn’t good.

 

PROTECT your Credit it is your BIGGEST weapon in a Loan War!!!

 

Best Regards!

Moderator Emeritus
Posts: 5,267
Registered: ‎03-18-2008
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Re: How does applying for loans affect my credit score

 


EastLaw wrote:

 

ANY hard enquiry, as a result of applications you voluntary initiated for credit, such as credit card or mortgage enquiry will remain on your credit files for 12 months. These voluntary, or "hard", inquiries are the only credit inquiries that count towards your credit score. When you review your credit report, you might notice that several inquiries appear from businesses to which you didn’t apply for credit. Other businesses might check your credit report because they want to offer goods and services to you. For example, creditors who send “pre-approved” credit card offers have often checked your credit report first.

 


To clarify, these promotional inquiries, as well as periodic inquiries by your current creditors, are soft inquiries and have no effect whatsoever on your credit score.  These inquiries are also invisible to any prospective creditor.  So even if you have a few dozen soft inquiries on your credit report (like me), no one else will see them.

 

Regular Contributor
Posts: 162
Registered: ‎03-30-2008
0

Re: How does applying for loans affect my credit score


EastLaw wrote:

 

ANY hard enquiry, as a result of applications you voluntary initiated for credit, such as credit card or mortgage enquiry will remain on your credit files for 12 months. These voluntary, or "hard", inquiries are the only credit inquiries that count towards your credit score. When you review your credit report, you might notice that several inquiries appear from businesses to which you didn’t apply for credit. Other businesses might check your credit report because they want to offer goods and services to you. For example, creditors who send “pre-approved” credit card offers have often checked your credit report first.

 


For further clarification, inquiries can remain on your credit report for up to 2 years (although they might fall off sooner). However, "hard" inquires only affect your FICO score for 1 year.

Hard work & patience can go a long way!
8/2009 (myFICO): TU - 599, EQ - 656
7/23/2010 (LO pull): TU - 738, EQ - 801, EX - 785
4/12/2012 (myFICO): TU -778, EQ - 791
Member
Posts: 12
Registered: ‎05-16-2007
0

Re: How does applying for loans affect my credit score


Lel the moderator:

 

Thank you!

 

Those are some EXCELLENT points to add.

 

------------------------------------------------------------------------------------------------

 

TO  honeybunnygal:

 

 

When I disputed the 12 inquiries back in 05, I was notified in writing that all the hard inquiry (the ones proven initiated by me) will remain on my report for 1 year (12 months). I had no idea they could remain, that long, for 2 years. Thanks for adding that.

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