It’s one of the clear advantages brokers offer clients hunting for a mortgage, but even that is being threatened by mortgage specialists arguing the hit attached to their credit checks are much lower than those undertaken by brokers.
“It’s totally false,” says Ron Butler of Butler Mortgage. “We hear this constantly – the bankers are trained to say it.”
Butler is referring to the claim by mortgage specialists that they are able to perform credit checks that result in just a two-point hit to a client’s credit score as opposed to the eight-point penalty they claim is attached to a broker query.
It’s a boast that Butler and others argue as just another way for banks to attract and keep mortgage clients.
But there is a remedy to that type of fear mongering that keeps clients locked into bank mortgages: education.
John Panagakos, a principal broker with Dominion Lending Centres, says he informs clients that multiple checks in a short period of time will have just a small impact on score.
“If a client is shopping around for a mortgage, the credit bureau has built in a model that (allows for) multiple hits and it won’t drastically affect your credit score,” he says.
Even still, that one-time hit is often negligible against the credit score. And, as Butler explains to his clients, there are bigger threats to credit score than pulling up a report.
“What the consumer really needs to understand is the things that affect their credit is maxing out lines of credit or credit cards, rather than a couple of credit pulls,” Butler says. “Leaving your line of credit maxed out, month in and month out, is massively more impactful than a couple of credit pulls.”
Patrick Smith, a mortgage broker with Dominion Lending Centres, contends that the two-point cost of a credit check at the bank – however false – certainly removes that particular advantage from brokers’ arsenals, but he believes the impact to his business would be minimal.
“When you throw away eight points versus two points, (brokers are still) saving the clients the leg work of looking around and being well-versed in what terms are favourable and the things that banks aren’t necessarily disclosing,” he says.