Rate Shopping? Here's How You Can Guard Your Credit

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Rate Shopping? Here's How You Can Protect Your Credit
Scoring formulas group similar credit checks and count them as one when you search for certain loans.
By Erin El Issa Senior Writer Data analysis, personal finance, credit card Erin El Issa writes data-driven studies on personal finance, credit cards, investment, travel, banking as well as student loans. She loves numbers and strives to demystify data sets to help consumers improve their finances. Before she became the Nerd in 2014, she worked as an accountant for tax purposes and freelance personal financial writer. Erin's work has been cited in The New York Times, CNBC and the "Today" program, Forbes and elsewhere. In her spare moments, Erin reads voraciously and is unable to keep up with her two children. She is based in Ypsilanti, Michigan.




and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's level degree in journalism from Auburn University and a master's in education from Georgia State University. Before coming to NerdWallet, she worked for the daily papers, MSN Money and Credit.com. Her work was featured in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and other publications. Twitter: @BeverlyOShea.





3 February 2023


Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team editor and designer. Her previous experience includes the editing of copy and news for various Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in journalism and mass communications at Iowa's University of Iowa.







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If you're considering taking out a huge loan to finance an automobile or a home you should look for the best terms that you can get. Even minor variations in interest rates could add up to some big figures over the duration of a loan. It's not a good idea to take one loan you're offered without looking for alternatives.
Here's the information you need about rate shopping and the best way to do it .
Is rate shopping a thing?
Shopping for a loan isn't exactly the same as shopping for groceries -- there are different fees to get the same amount. The price you pay for your loan can be determined by your credit score, your debts and income.
You can't comparison shop without applying. Your credit scores may take a small, temporary drop when a lender reviews your credit score because you've made an application for an loan.
However, scoring formulas take the probability that you're looking for a single loan into consideration. Similar credit checks are put together and counted as one -The scoring models know you're not in the market for several houses or student loans or automobile loans.
This allows you to compare rate of interest on the car loan prior to going into the dealership, for instance. And that lets you see whether the dealer is able to beat your price. This is also true for mortgages and student loans.
How rate shopping can affect credit
There are two types of checks for credit: soft and hard.
The kind of credit inquiry that could affect your credit score, the " ," happens when you make an application for credit. Every inquiry can take a few points off your score. That's why you want to be sure to rate your shop within a window of time, so multiple inquiries that are hard to answer can be viewed as one for scoring purposes.
Another type of credit inquiry, called a "soft inquiry," will not affect your credit score. It can happen when you or a marketer, or potential employer pulls your credit.
Your time frame for rate shopping
Based on the scoring method employed, your rate shopping time frame will vary from fourteen to forty-five days. Similar inquiries within this period are unlikely to affect your score.
The length of time varies among scoring companies. The most recent FICO scores have the option of 45 days for rate shopping, and VantageScore employs 14 days. However there are some more old FICO scoring models still in use offer the option of a 14-day period. The best way to ensure security is to group applications in the same 14-day period.
Some lenders and credit card issuers have the "prequalification" procedure that doesn't affect your credit at all. It's a method to determine the likelihood that you will qualify before you actually apply. Your credit score won't be affected in the event that you decide to apply.
Be aware of how your credit score is assessed
See your free score and the factors that influence it, and get insights into ways to build your score.










When can't you rate shop?
While loans for homes, cars and even education are able to be combined to facilitate rate-shopping, you won't be able to batch applications for credit cards or credit consolidation loans.
Individuals who are in a very short period of time are considered to be high-risk and the inquiries are counted. NerdWallet recommends spacing credit card applications by at least six months, if you are able to.
Develop a strategy for rate shopping
The goal for rate comparison is that you find the most competitive rates, and you can do this without jeopardizing your credit. Here's how:
Apply for loans within a small time. If you're not certain how long your window for application is, be safe and limit your application up to 14 days.
Don't make other credit applications simultaneously If you are able to avoid it. If you're looking for a mortgage, you should avoid applying for a credit card at the same time.

Finding the most affordable deal on a huge loan can save you a chunk of money. When you apply for an loan after having built an account and know how to batch your applications will allow you to get the best conditions.


Authors' Bio: Erin El Issa is an expert in credit cards and a writer for studies at NerdWallet. Her work has been featured by USA Today, U.S. News and MarketWatch.


Bev O'Shea was a former credit writer at NerdWallet. Her work was published on the New York Times, Washington Post, MarketWatch and elsewhere.







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