Home equity loans online can hurt your credit score

The Web makes it easy to shop for a house, but a buyer can just as effortlessly shop for a home loan or mortgage online as they can for a house itself. The growth of the Internet has made it easier than ever to buy or sell a home. Rather than driving all over town or all over the country to shop for houses, potential buyers can now simply surf through a selection of houses using their computer from the comfort of their own home.

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The market for real estate, while slowing a bit, remains healthy and will stay that way as long as families need a place to live. All one has to do to shop for a loan on the Web is to find a couple of loan Websites using Yahoo! and compare rates. Online buyers ought to be cautious - how you go about looking for a mortgage on the Web can greatly affect the rates you are offered and can even have a horrible effect on your credit report. Just as there are a lot of Sites devoted to selling houses, there are hundreds of sites devoted to the sale of home loans.

The reason online buyers should be careful is the difference between how you ask about loans in person versus how you make inquiries about loans online. If you stroll into a loan office or bank and ask about interest rates, you can provide some information about your income and past loan history. If the lender knows your history of financial transactions, they can offer some information about their mortgage rates. If you are serious and like what you have heard from a particular lender, you can formally apply and get an accurate quote regarding prices. You can get a general idea of how much you will have to pay for a loan in terms of interest rates, discount points and closing costs without actually having to apply for a loan or having the mortgage company run a credit check on you.
 

If you apply for a loan on the Web, the situation is different. Most mortgage companies will then follow up an online estimate with a phone call from a customer service agent. Once the lender has examined your credit history, which takes only a few minutes, they can call you with an offer of a price. So that you might receive an Internet quote, you must fill out a form that requires you to give your Social Security number to the lender, which is, in reality, agreeing to let the lender run a credit check on you when you fill out the form. Many, if not most mortgage companies have automatic inquiry programs that handle the rate quotes.

A number of inquires about the same sort of thing that take place within a two week time period are normally regarded as a single inquiry by the credit bureaus. Credit scores can be hurt from many queries because people who apply for a lot of loans or credit in a short period of time are frequently seen by financial institutions as "desperate." There is no problem in having a credit check done; a lot of people do that all the time. If several credit inquiries are spread over time, those inquiries may be regarded as separate credit checks. A number of separate inquires over a prolonged time period can actually reduce your credit score!

Potential damage to your FICO score should not prevent you from shopping for a mortgage on the Web. Just be careful not to apply to often.