How Credit Score Gets Checked at a Loan Time

Every time you fill out a loan application, and apply for a loan, whether it is a home loan, a student loan, a car loan, a credit card, a consumer credit card at a department store, even a gas credit card, your credit score is affected. If you have bad credit, or less than perfect credit, when you apply for a loan, your FICO score gets checked by a credit bureau. Those credit bureaus gets paid each and every time you submit you loan application, so that the lending institution can property evaluate your qualifications for a loan.

You might say, I want to get a home loan. Or, I want to refinance my house now. And you are off to a bank, or a loan broker. You fill out your home loan application and wait. The loan broker or a loan officer will put your loan application into the system and it goes straight into credit bureau. Sometimes your loan application gets submitted to a single credit bureau, in cases with bank credit cards, or consumer credit cards. Sometimes, heavily in cases of a home loan application, your credit score will be checked with all three major credit information collecting companies. Say, the particular lender cannot approve your loan application. You go off to another lender and the same process takes place over again.

If you have bad credit, or what we refer to as poor credit, or even less than perfect credit, you may get turned down for a home loan several times with several different lenders. For instance you want to get a loan from Wells Fargo. Wells Fargo turns you down for a loan. So you are off to Bank of America. Your loan application gets turned down at Bank of America as well. You go to another bank and get turned down for a home loan there as well. So you are off to a subprime lender. And a subprime lender submits your loan application to ten different financial institutions. By the time your credit score is checked there, it has already gone through several credit score checks prior to that. But every time your credit gets pulled, the credit reporting agency gets paid by the lender. Your credit score may go down up to eighteen points every single time your FICO gets checked. The lower credit score you have, the more times you need to fill out a loan application with a lender. So, your less than perfect credit gets worse, as your credit score gets lower and lower.

Credit reporting agencies love people with bad credit, because they benefit every time your FICO gets checked for each different bank you’ve applied for a loan at. So, if you start your day with a credit score 600, go to three different lenders and get turned down for a home loan at all three of them, the next day your credit score may already be 550, which will make it even harder for you to get a home loan not only from a bank, but even from a subprime lender.