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We are about to apply for a reverse mortgage. If we are turned down, will that affect our credit score?

By Mary G. on 02.13.2019

Hi Mary,

No one knows for sure what goes into the “little black box” that determines credit scores other than the companies who supply them.  We all know a little just from the use of credit, but we never know to what extent those items will affect you.  We know for instance that applying for excessive credit will lower your score, but how much is too much?  We know that late payments, too much credit or not enough credit will also lower scores.  We know that stability in your credit profile is good, but we are not sure what changes will adversely affect your scores. 

We do know though that your approval or denial of credit is not reported to the agencies by lenders.  Therefore, if you do not receive a new loan when you apply with one, the agencies do not know if you were denied credit or if you chose not to complete the transaction for another reason.  In other words, to make a long story short, if a lender denies your application for a reverse mortgage, it should not have any effect on your credit score because the credit agency has no way to know if you were denied credit or if you chose to cancel for your own reasons. 

We have been told from credit professionals that it also should not affect your score badly if you are turned down by more than one lender in a short timeframe as multiple inquiries in the same field are treated the same as someone shopping for the best options and therefore, that borrower should not be penalized for being a prudent borrower.  Credit score providers look at that differently than someone who might have many recent credit inquiries in different areas (cars, mortgages, credit lines and credit cards, etc) which could tend to indicate the individual is about to open many new lines of credit for which they are not prepared.

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