Home > 2014 > Credit Score

My Mortgage Lender Wrecked My Credit

Advertiser Disclosure Comments 2 Comments

A reader, Shelly, recently told us she applied for a mortgage while her home was under construction. She had given the lender permission to pull her credit reports, which is routine in such a situation. However, she recently learned that she won’t be eligible for the interest rate she expected — and will have to pay an additional $40 a month. The reason? Because of too many inquiries on her credit report. She said the excessive inquiries are all related to the mortgage.

Her questions: Is that legal, and whom should she contact for help?

First, yes it is legal for a lender to pull your credit reports or scores multiple times, as long as a company has a permissible purpose for getting the score. However, lenders don’t typically do it because every pull costs them money, says Credit.com Director of Consumer Education Gerri Detweiler. Also, once you already have a loan, a credit inquiry usually — but not always — is categorized as an “account review” inquiry, which is a soft inquiry that doesn’t affect your scores. What is more typical is an initial credit pull when you apply for a mortgage and a second one shortly before closing to make sure that there are no substantive changes.

Scott Sheldon, a senior loan officer and consumer advocate based in Santa Rosa, Calif., said that he could think of scenarios in which a score would be pulled repeatedly, but they normally involve situations in which a borrower’s score is likely going up, and the borrower gives specific permission for the additional inquiries.

What can Shelly do? She can submit a complaint to the the Consumer Financial Protection Bureau, said Sheldon. They will look into it and pursue it from there. Another option is to consider contacting a consumer law attorney to see if she possibly has a credit damage case.

It’s sometimes difficult to tell if the inquiries have been the exclusive source of the credit score dropping. Inquiries are often listed as a “reason code” when in fact they usually play a minor role in the score. Shelly would have to carefully compare her credit scores and credit reports to make sure nothing else could have caused the score to drop.

Keeping Track of Your Credit

And if you are looking to buy a home, should you be worried this could happen to you? Not really, but you should also be careful to protect yourself.

First, don’t apply for new credit after you apply for a mortgage. Inquiries and new accounts can cause your credit scores to drop. The effect is usually small and fairly temporary, but in a mortgage situation, a drop of a few points could cost you thousands of dollars over the life of the loan if you are forced to take a higher rate.

Second, consider monitoring your own credit — and if you have not yet applied for a mortgage, check your credit reports first. Once you’ve applied for a mortgage, you can monitor your credit scores for changes (there are free tools that can help you do that, including Credit.com’s Credit Report Card).

“When a consumer accesses his or her own credit report through a credit monitoring service, it creates a soft inquiry, which does not affect their credit scores,” Detweiler said. “It could be a good way to tell what’s going on. A couple of specific situations where this would be valuable would be where a consumer is in a construction loan that will need to become a permanent loan in a few months or even a year, or when they have been initially pre-approved for a mortgage but are taking time to shop for a home. In either of these situations it can be helpful to keep an eye on your credit so there aren’t unwelcome surprises.”

More on Credit Reports and Credit Scores:

Image: JumpStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Barbie Jay

    You can also write the mortgage company a certified letter disputing their actions and request they remove the inquiries from your credit file. When trying to locate an address, call and ask for the mailing address to the “credit bureau disputes” department or division.

    • MuzikGurl

      But doing this could also look bad because it is a dispute and many lenders and creditors frown upon people with disputes currently active on their reports. If she disputes these inquires it will tag her report and all others will see that tag and many would be afraid to even bother with her because they do not want to deal with someone who disputes something so small as an inquiry. Usually inquiries only cost a point or two on your score and if she was denied because of the inquiries she could ask the lender or credit in which she was rejected from on how many inquiries does it take to be approved..usually they will give you a number like some creditors would say if you have as little as 2 on your report within the past year you will be rejected others will say they can go up as high as 20 within a year…Her best bet is to leave it alone so she won’t be “black listed” for future pulls…these inquiries can stay on your report for 2 years but only held against you for 1 year so, wait it out in the meantime don’t apply for anything else avoid having any more pulls and send in a written request to the loan company who made the pulls to stop all pulling and to remove you from their list of inquiries. By law they have to comply if they continue to pull after you written request them to stop then seek out a lawyer because this then becomes a legal matter.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team