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The Resource Center Credit Fraud & Credit Monitoring | article

Dealing with Excessive Credit Inquiries When You're Moving

While there are no credit implications for consumers who check their own credit reports and scores, an excessive number of hard credit inquiries during a short period of time may have a negative impact. It can be especially easy to run up the total number of credit inquiries during the moving process.

Homebuyers moving to a new home often purchase new furnishings, electronics or other items, and if they open up any new credit card accounts during that time period, it may put a dent in their good credit score. It’s important for homebuyers to distinguish between good and bad credit practices during this time, especially if they haven’t yet closed on a new mortgage.

What is a credit inquiry?
A credit inquiry occurs when a copy of an individual’s credit scores and reports has been requested, either by a business or individual.

“Soft” credit inquiries are defined as instances in which a consumer has checked his or her own credit scores and reports, or when a business that’s already familiar with the consumer checks that information. For instance, pre-approved credit card offers often require a company to perform a soft inquiry on a consumer’s reports.  Hard inquiries concern applications of new credit, such as when a consumer applies for a home loan or opens a new credit card.

Soft inquiries harm a person’s credit score, but that’s not always the case for a “hard” inquiry. An individual’s credit score may take a hit in those instances because they are taking on new credit.

Ways to minimize hard inquiries while moving
Homebuyers can incur a number of hard inquires during the moving process, but proper planning can ensure their effects are minimized.

1. Finish mortgage shopping within 30-days — It’s a good practice to obtain several quotes from different mortgage lenders during the financing process, but each quote requires a separate hard credit inquiry. If all the quotes are obtained within 30 days, some credit scoring models may consider them as a single hard credit inquiry. That will reduce the number of times an individual’s credit score is affected, making it important to set aside one month alone for comparison shopping.

2. Think twice about a store credit card — Homebuyers shopping for furniture or appliances for their new home may be enticed by an offer for a department store credit card that promises savings on those expenses. However, that new card will require another inquiry and put another revolving account on their credit report.

3. Wait to make major purchases — Homebuyers are also advised to wait until after they’ve closed on their home to make major purchases. Buying a new car may require an auto loan, and new furniture or electronics may need to be paid with a credit card. Both of those scenarios could affect a home buyer’s debt to income ratio, an important figure banks monitor when assessing an applicant’s creditworthiness. An applicant who assumes excessive debt before the home is officially bought may be rejected for financing.