You may have heard that a credit pull will adversely affect your credit score — and it can, at least temporarily, depending on the circumstances. Here’s what you need to know.

How Credit Works

When you apply for a credit card, auto loan, or mortgage, the lender will likely “pull your credit,” which means they will make an inquiry (a pull) using one or more of the three major credit bureaus: Equifax, TransUnion and Experian.

These bureaus collect information on your credit accounts, such as your payback status and history. This data, collected over time, can be accessed by certain eligible third parties, including lenders and creditors.

Credit scores are calculated based on the information in your credit reports. FICO credit scores, which typically range from 300-850, are most often used by mortgage lenders to decide if you are worth the risk of loaning a certain amount of money and at which terms (such as the interest rate on paying back the loan) you will be offered.

Related: 4 Ways to Help Lower Your Interest Rate

How Inquiries Hurt

Any credit inquiry — such as opening a new credit card account — can have a negative effect on your FICO credit score. Such inquiries may be seen by other lenders when they check your credit, which can have a negative effect, too. When lenders see a number of inquiries on your report, it suggests to them that you are actively looking for loans (other than just a new mortgage), which can make you seem risky to them. They may wonder why you are looking around for money — is there something happening in your financial future that may leave your ability to pay back the loan insecure?

Know Your Score Before Applying

If you’re taking out a mortgage, credit inquiries will be a necessary part of the application process, but there are ways to minimize the adverse effect on your credit score.

First, avoid applying for any new credit (such as a car loan or a store card for purchasing furniture) when you’re applying for a mortgage and during the mortgage process. Your lender will do a final pull of your credit before your mortgage closes and these new inquiries will invite questions. Wait until the paperwork is signed and the loan is closed to take on any new credit.

Second, be sure you know your credit score and, if it’s on the low side, take time to improve your credit habits, which will help raise your score before you apply for a mortgage. There are several ways to view your credit score without the help of a credit bureau. A credit card company you use, your bank or lender, a non-profit credit or housing counselor, or a credit reporting agency (you’ll probably have to pay a small fee if you go this route) can provide it.

Related: What Every Military Homebuyer Should Know About Credit

To get the best terms on a mortgage, you’ll want your FICO score of at least 720 (and higher is even better). If your score is lower than 720, consider paying down your debt and reducing credit utilization (the amount of available credit you’re using) to under 30% for each card or account before you apply for a mortgage.

If you need to raise your score, you’ll need to understand that doing so will take time and commitment as you strategically pay off outstanding debt — six months, a year, or even longer — so start well before you decide to shop for a new home.

And be aware there are a lot of scammers out there offering to “fix” your credit. To be safe, only work with HUD-approved housing and credit counseling agencies or a trusted resource like AAFMAA Mortgage Services LLC (AMS).

Here’s the Good News

You may have heard that it pays to “shop around” for a mortgage and, generally, that’s true. By talking with more than one lender and having each look at your credit, you may be offered better terms for the loan.

But you need to be strategic in this timing to prevent adversely affecting your credit score. If you have several pulls from mortgage lenders within a 45-day window, they are recorded on your credit report as a single inquiry.

That makes sense to mortgage lenders because they will realize that a single borrower will only buy one home, not multiple homes. This latitude allows you to shop around and get multiple preapprovals and even official Loan Estimates without taking on a penalty each time.

And, in fact, it’s important to compare offers from lenders so you can choose the one that best meets your needs. Rates and fees can vary greatly from lender to lender. Even small changes in the Annual Percentage Rate (APR), or interest rate, can mean saving tens of thousands of dollars in interest over the life of a loan.

As long as the credit is pulled by all mortgage lenders within a 45-day window, the impact on your credit score will be the same.

How to Get Your Credit Report

You can get a free copy of your credit report once per year at annualcreditreport.com. If you find errors, contact the credit reporting company that supplied you with the report and the creditor or company that provided the information (called the “furnisher” of the information). You will want to include full documentation of why you feel there is an error in the report. Your credit report includes directions about how to dispute inaccurate or incomplete information.

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!