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Does Shopping Around For Credit Hurt a Good FICO Score

Your FICO score is based on your credit report and 10% of the score is weighted on your applications for credit listed on it. In particular, your FICO score looks at how many accounts you have recently applied for, how many new accounts were opened, how much time has passed since opening a new account, and how long it has been since you have applied for credit.

Looking at the criteria, people have come up with the idea that shopping around for a loan can hurt your good FICO score. This could stem from the fact lenders want you to get a loan from them and not shop around. Shopping around actually is the sign of a responsible consumer and your FICO score recognizes that. This is why when you apply for a mortgage or an auto loan you will be given an allotted period of time to shop around and it will not hurt your good FICO score. The formula used today gives you a 30 day window to get several different quotes from lenders. So if you apply for a mortgage and get quotes from several different companies, it will actually only count as one if it is done over a 30 day period. This is also true for auto loans. If you do go over the 30 days, it will count against your good FICO score and is seen as two different inquiries. Another note is a mortgage can take over 30 days to get and this will not hurt your score. The shopping for a loan is what matters and must be done in a short period of time with two weeks as the standard.

Credit cards do not get the same treatment and applying for several cards in a short period of time will hurt your good FICO score. The FICO score once again only makes the exception for mortgages and auto loans. What you need to stay away from is applying for any different types of credit when trying to get a mortgage. This will hurt your FICO score and lenders too do not like to see the use of other forms of credit right before a big outlay like a mortgage.

The proactive way of shopping around for a loan is to get your FICO score on your own and then talk to lenders. This will help you get an idea of the potential loan you could get. There are several different sites like MyFICO that actually allow you to see what you will get on a mortgage. You can plug in the amount and the term and you can see an estimated monthly payment based of your FICO score. You should always know your FICO score before applying for any loan. You will be more informed and prior to the process you can make the decision to whether or not you can afford it.

Article Source: http://articleaddict.com

If you are still wondering what is a good credit score, visit Kyle’s blog FICO authority. There you can find more information on how to get a free online FICO score before applying for a loan.

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