Multiple mortgage pre-approvals and effects on credit score
"The problem is not the credit score; it is the ""competing"" inquiries. Multiple inquiries will be considered as one if done withing a short time period (2 month, IIRC) and for the same kind of credit, because people do shop for rates, you're not the first one to do that. So don't worry about that. What you should be worrying about is banks asking questions about these inquiries, which is an annoying (at least for me) technicality. You'll have to explain to each of the banks that you want a pre-approval from that you're going to take the mortgage from them, and not from anyone else. In writing, with your signature notarized. Which is OK because it's done (the signature and notarizing) at closing, but you'll have to ""convince"" them that they're the chosen ones to get approved. Other than that it's pretty simple. I've done that (including the declaration that I'm not going to take any loans based on the other ""competing"" inquiries), and it worked fine when I took the original mortgage, and when I refinanced it later in a similar ""shopping"" fashion. Do it closer to the actual bidding, because closing does take at least 3-4 weeks, and the rate lock is usually for 30-60 days, so not much time to shop if you take that road." "Johnny.  I recently bought my first home as well, and I have worked in the credit business (not mortgage), so I think I can answer some of your questions.  Disclaimer first that I'm in NY, and home buying does vary from state to state. In my experience, pre-qual is not too different from pre-approval.  Neither represents any real committment on the part of the bank (i.e. they can still deny approval at any point), and both are based on pulling your credit bureau and calculating ratios based on your stated (probably not documented) financial information.  It's theoretically possible that a seller would choose a pre-approved buyer over a pre-qualified buyer, all other things being equal, but all other things are seldom equal. Remember also that you don't need to ultimately get a mortgage from the same bank that you use for the pre-qual.  The pre-qual just shows that you are probably credit-worthy and serves to give you some credibility with sellers.  Once you have an accepted offer and need to find a real mortgage, you can shop around for the best rate and best loan structure.  Banks don't need to have pulled your credit to quote rates, but they will need to have a general idea of your FICO range.  Once you find the bank you like with the best rate and actually apply for the loan, they will pull a hard bureau, and if your scores are different from what you said before, the rate may change, but within the same range, you'll generally be ok.  Also, banks do not necessarily pull all 3 bureaus; they may only pull 1, as it costs them for each pull. 2 potential downsides to this approach: Also, make sure you have a mortgage/funding clause in your contract, as banks are unpredictable, and make sure you have a great real estate lawyer, not a legal ""factory"" - the extra few hundred $ are worth it. Don't overthink this credit stuff too much.  Find a good house for a good price, and get a no-nonsense mortgage that you fully understand - no exotic stuff.  Good luck!"
Check with your bank.  As of January, 2015, the following banks and credit unions are offering free credit-scores: Announced, in the pipeline: Source: Banks to offer FICO credit scores for free Personal Experience: I've been receiving free FICO score from my credit union for more than 6 months now. Advice: Most people have multiple bank/credit-union accounts. The FICO score will be the same whoever offers it. If none of your financial institutions offer you a free credit-score then you may opt for free services like creditkarma.com or other paid services. None of them are the widely used FICO scores, but they can be a good gauge of your credit standing. Please note that a credit-score is number summarizing your credit-report and should not be confused.  In the news: Credit scoring has changed recently and the answer to this question will have slightly changed. While most points made here are true: But now (as of July 2017) it is possible having a large available credit balance can negatively effect your credit score directly:  ... VantageScore will now mark a borrower negatively for having   excessively large credit card limits, on the theory that the person   could run up a high credit card debt quickly. Those who have prime   credit scores may be hurt the most, since they are most likely to have   multiple cards open. But those who like to play the credit card   rewards program points game could be affected as well. source You don't need a credit score. After I paid off my house mortgage many years ago I had this discussion with my mortgage agent (now bank VP). Your credit score is not a measure your ability to repay. It is a behavioral model and a statistical measure of the likelihood that the banks will make money off of you when they give you a loan, and a marketing tool that the banking industry uses to sell you long term and short term debt (mortgages and credit cards). Statistically speaking, people who close out major loans change their behaviors, and the model captures this change in behavior. In my own case, even though I have a credit history and sufficient cash is the bank to buy my next home outright, I have no credit score . What the model says is that people with my behavioral profile are not likely to take a loan, and if they did take one, they would pay it back so quickly that the bank would not even recoup the cost of initiating the loan. In short, people with my profile are bad news for the loans side of the bank. Thanks @quid for suggesting I capture this and post it as an answer If your primary concern is a drop in your credit score, go to a mortgage broker instead of multiple banks and finance companies. Each time you ask a bank or financial institution for a loan, they do a hard pull on your credit rating which costs you a couple of points. Visit a dozen lenders and you'll lose 24 points. You will also be signalling to lenders that you're shopping for money. If you visit a mortgage broker he does a single hard pull on your credit score and offers your loan query to a dozen or more lenders, some of which you may not have even heard of. This costs you 2 points instead of 24. If you are only going to visit one financial institution or another specific one, the drop in credit score is the same couple of points. The above answer only applies if you make loan inquiries at multiple institutions. Closing a credit card decreases your total available balance, which can have a small negative effect if that credit card is a significant portion of your available credit.  If it is not, then it likely will have little impact on your credit in that department. However, the case you explained - get a card, use it for a short while, then dump it - won't have much long-term impact to your available credit, since you will end up with the same amount as you started. The second factor will be the average age of accounts.  This will affect you both in the short and long term, if you've had accounts open for a fairly long time, but won't impact you much if your credit history is fairly short.  Even closed accounts affect the Average Age of Accounts for FICO scores (but not for some other scoring methods such as VantageScore).  If you have only one other account, and it was 10 years old, then opening and closing this decreases your average age of accounts from 10 to 5 years - a significant hit which will not go away for years (10+ years in some cases, though usually 7 years).  This will lower your score some.  If you have had a lot of accounts, though (including things like mortgage, student loan, etc.), this won't have as significant of an impact, and if you had a short history in the first place, it won't hurt you much either. The third factor will be the hard credit pull.  That will have a small negative impact for around six months; so don't do this just before getting a mortgage, but mostly this won't be a significant impactor for you. "My husband made a similar car loan decision when he was younger and didn't have an established credit history / favourable credit rating.  As a result, he ended up paying triple what the car was worth, because of the interest. When we consolidated our finances, this ugly loan was first on our list of priorities to change, convert, eliminate, but unfortunately, in our case, the terms of the loan were such that only the lender benefited.  There was no incentive to pay off the loan early, in fact, we would have to have paid all the future interest at once, without saving a penny. So check the terms of your loan - hopefully you're better off than we were.  In our case, the only upside we could figure was the lesson of ""live and learn""!" My realtor told me that even though they're only asking for 1/2    the money and have excellent credit that the mortgage company may   not lend it to them if I'm over priced. Is this true? I've never heard of it before. It is a chance, but it is a red herring to the discussion. Having excellent credit has nothing to do with being eligible for a debt object of a specific size. Just because you have excellent credit, would you get approved for a property of $10,000,000 if you only made $35,000 a year (and had no other net worth)? But regarding your potential buyers, a chance vs a good chance is different. Your realtor just told you some basic always true lending fact that has nothing to do with your situation. "As a former consumer credit counselor, who worked with struggling homeowners and first time homebuyers I would argue that it is a mistake for lenders to rely on gross income and assumptions on what an applicant spends their income on. I think lenders do this because they believe it is efficient and may not understand the long term ramifications for the stakeholders, e.g. the borrower, the lender, the servicer, the investor, the broker, the taxpayer, the marshall, the foreclosure lawyers etc. Or lenders do know the impact of a superficial mortgage screening, and intentionally want to enrich themselves in the short term while harming other stakeholders in the long term. Developing a budget that reflects what a person can realistically spend on their mortgage takes much longer than signing up for a Rocket mortgage. I would say an hour minimum for the first appointment to get a baseline, and at least two follow up appointments to make adustments soon after or whenever a borrower's financial situation changes dramatically. Credit counselors factor in all of the factors mentioned above, i.e. take home pay, future pay vs current pay, the ability to adjust deductions, seasonal expenses, multiple sources of income and their frequency, debt load etc. Budgets are always fluctuating, but when it is done right by a qualified professional the result is a much more accurate financial picture.  The consequences for not doing this type of old-school due diligence, or for willfully choosing to skip it, are varied. First off, mortgages will be given to homeowners who should never have qualified in the first place, and likewise denied to homeowners who should qualify. This will result in market distortion and this distortion was a primary contributor to the 2008 subprime mortgage crisis and the wave of foreclosures that came with it. Another consequence is the stripping of wealth from minority communities since they are often targeted by the most unscrupulous of lenders. Additionally, the securitization of mortgages based on poor diligence at the loan officer level means loan portfolio ratings are questionable, investors will lose money, and small banks who are heavily invested will fail as they did in the past. Depending on the federal enforcement of Dodd Frank Act, the taxpayers may or may not have to pick up the bill from a bailout of a big mortgage bank that was ""too big to fail,"" via higher taxes, lost jobs, lost homes, and other negative externalities that were not accounted for by the loan officer, or willfully ignored.  Lastly, borrowers also have a responsibility to provide accurate financial information, which they don't always do. Unfortunately, in a capitalistic society where property is commoditized instead of communal, there is always mistrust, competition, the fear that you will be left behind, or the desire to get ahead. This could incentivize cheating by either the, borrower, the broker/lender, or both in this example e.g. no-doc negative amatorizing loans. This is just one of many other negative externalities. So the only true fix would be a switch to communal land ownership. In the interim, I would push for universal borrower access to low cost consumer credit counselors and a change in loan officer training and incentive structure."