Have you ever wondered why your lender requires you to provide your Social Security number when applying for a mortgage or how your credit score is affected when your lender pulls your credit report? We answer both these questions here.
Among the many questions clients often ask mortgage lenders are these two:
- “Why do you need my Social Security number?”
- “How does a credit report pull affect my credit score?”
Both bits of information are vital to your financial health, so when you’re applying for a mortgage, both need to be checked by your lender. We explain why they need your Social Security number and how your credit score is affected when lenders pull your report.
Social Security Number
Lenders need your Social Security number to run a credit check so they can see your credit score. They pull three reports by the major credit bureaus, Experian, Equifax and Trans-Union. Once they see your credit scores, they match this information with the Social Security number you provide to verify all the information is correct.
Because your credit score reflects your reliability and the likelihood that you’ll pay off your debts, it is vital for lenders to see this number and your credit report. They need to be reassured they will get their money back before they offer you a loan.
How Your Credit Score Is Affected
A follow-up question from many clients is “How is my score going to be affected by having my credit report pulled?” You may have heard one of the many credit score myths that your score will tank as a result of one pull. While your score will go down, it’s not as bad as people often think.
When a lender checks your report, a hard inquiry is recorded. Typically, the first time you have your score accessed, your score will drop about three to five points. The pull may remain on your credit report for two years, but the damage to your score will decrease as time goes on. This is a minimal drop when you consider your overall score, and these points can be easily made up in a few simple steps.
The good news is that the three credit bureaus can differentiate what types of organizations are accessing your credit, and a pull from a mortgage lender isn’t viewed as negatively as some other types of organizations that might want to check your credit report.
If you do have your credit pulled, you have a 14-day window where your credit can be accessed multiple times with no additional impact on your score. This means that your credit score will only be affected after the initial pull, and any additional pulls within that two-week window won’t impact your score. Be mindful of this when you are looking at multiple lenders, as you’ll want them to pull your report around the same time so your score is only minimally impacted.
It’s important not to have your credit pulled too often, as you might be penalized. Applying for too much credit at once may flag you as a risk to lenders.
Applying for a mortgage can seem complicated, so questions are bound to come up. Do you have any related questions? Post them in the comments below, and we’ll be happy to answer them!
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