Can a mortgage company review your credit?
If you are one of the many people who made a loan with a mortgage company and are wondering why that company has access to review your credit report, this post is for you. Here you’ll learn why in much more depth.
When you do business with a mortgage company, it can check your credit history from time to time, usually this review is done every month. Such a review is known as a credit inquiry which is added to your credit report and can have an impact on your credit score.
It should be noted that there are two types of inquiries, one of which is known as a soft inquiry. These inquiries are not really the result of a transaction you initiated, they do not factor into your credit scores.
They are usually the result of a company requesting your information to send you a pre-approved credit offer and you may not recognize every name you see listed there.
To get a clearer picture, soft inquiries may be a record of an account review by the mortgage company you already do business with.
On the other hand we have the hard inquiries. These hard inquiries may be seen by lenders and others who view your credit report, and may be factored into your credit scores. They are usually the result of an application for credit or service accounts.
An important fact to consider is that a hard inquiry indicates to lenders and credit scoring agencies that you may have opened a new account or acquired new debt that does not yet appear on your report.
This may cause a temporary drop in your credit scores, but any impact is usually minimal. Once the account appears on your credit report and lenders can see that you are making payments on time and managing well, it will cause your scores to improve.
The impact on your credit score from an individual inquiry may be slight, but the impact can get worse as more are added to your credit report.
That’s why many inquiries in a short period of time can cause a temporary decline in your scores, as these inquiries may remain on your credit report for a period of two years.
Remember that the most important factors in your credit score are your payment history, which shows lenders whether you have paid your bills on time, and your credit utilization ratio. Your utilization rate calculates the percentage of available credit you are currently using.