Don't Overdo It - loans

Kiplinger's Personal Finance Magazine, August, 2000 by Kimberly Lankford

Q&A | How SHOPPING FOR A LOAN can make it harder to get one.

When shopping for a mortgage at LendingTree.com, I received offers from several lenders. Now my mortgage broker tells me that Web shopping lowers my credit score. Does this really happen? --BOB ROOKS, Boston

Using LendingTree.com alone should not hurt, but your score may suffer if you shop around too much. When lenders calculate your credit score--which assesses the probability that you'll repay the loan--your bill-paying history and how much debt you already have are the keys, says Craig Watts, consumer-affairs manager for Fair, Isaac, which develops credit-scoring calculations.

But part of the score is based on how often you've authorized lenders to review your credit report. Lenders worry that too much activity means you're trying to get too much credit and may become overextended.

Asking for a personalized quote usually triggers a look at your credit record. LendingTree.com, for example, gets a copy of your report and passes it on to potential lenders. Deborah Roth, a spokeswoman for the firm, says individual lenders usually don't request your report again. But even if they do, credit-scoring rules prevent the inquiries from having too much effect on your score. Any mortgage or auto-loan inquiry made in the past 30 days appears on your credit report but isn't included in your credit score. All inquiries made during the previous two weeks are counted as a single one for scoring purposes.

Because of this time frame, searching on LendingTree won't affect your score nearly as much as visiting several lenders separately and asking for personalized quotes over a lengthy time period, long before you buy a house.

"The Internet makes shopping for loans a lot easier," says Rasha Elass, an analyst with Gartner Group's e-business intelligence group. "Ninety percent of shoppers do it as window shopping. My advice to consumers is not to shop around unless you are serious about closing."

BORROWING: Low loan rates around the U.S.

Baltimore            LENDER               RATE/DESCRIPTION
                                          (INDEX PLUS MARGIN)

Fixed-rate 30-year   Susquehanna Bank     8.13%/1 pt.
One-year ARM         Susquehanna Bank     6.88%/1 pt. (Treasury
                                          index + 2.88)
Home-equity line     Susquehanna Bank     9.25%/24 mos.,
                                          $10,000 minimum
                                          (prime + 1)
Car loan             Susquehanna Bank     8.25%

New Orleans

Fixed-rate 30-year   Bank One/Louisiana   8.1%/1 pt.
One-year ARM         Hibernia National    6.63%/1 pt. (Treasury
                                          index + 2.75)
Home-equity line     Regions Bank         8.5%/6 mos., no minimum
                                          (prime)
Car loan             Regions Bank         9%/$35 fee

Minneapolis

Fixed-rate 30-year   U.S. Bank            8.13%/1.13 pts.
One-year ARM         Firstar Bank         7%/1 pt. (Treasury
                                          index + 2.75)
Home-equity line     National City
                     Bank/Minn.           9.5%/$5,000 minimum
                                          (prime)
Car loan             Firstar Bank         9.24%/$75 fee

Houston

Fixed-rate 30-year   Bank of America      7.75%/3.5 pts.
One-year ARM         Bank One/Texas       7%/1.3 pts.
                                          (Treasury index + 2.75)
Home-equity line     HOME-EQUITY LINES ARE NOT AVAILABLE IN TEXAS
Car loan             Washington Mutual    9.13%

San Francisco

Fixed-rate 30-year   California Federal   7.5%/3.46 pts.
One-year ARM         California Federal   6.13%/1.53 pts.
                                          (Treasury index + 2.5)
Home-equity line     Washington Mutual    5.99%/6 mos., $10,000
                                          minimum (prime + 0.74)
Car loan             Union Bank           8.9%/$75 fee

Baltimore                NUMBER

Fixed-rate 30-year    800-787-432t
One-year ARM          800-787-4321
Home-equity line      800-787-4371
Car loan              800-787-4321

New Orleans

Fixed-rate 30-year    800-777-8837
One-year ARM          800-468-7808
Home-equity line      225-767-9300
Car loan              225-767-9300

Minneapolis

Fixed-rate 30-year    800-934-9555
One-year ARM          800-784-9777
Home-equity line      612-904-8188
Car loan              800-784-9777

Houston

Fixed-rate 30-year    800-247-6262
One-year ARM          800-695-1111
Home-equity line
Car loan              800-788-7000

San Francisco

Fixed-rate 30-year    800-225-3334
One-year ARM          800-225-3334
Home-equity line      800-788-7000
Car loan              800-796-5656

RATE BENCHMARKS (as of June 12): PRIME: 9.5% 11TH DISTRICT COST OF FUNDS INDEX: 5.08% ONE-YEAR TREASURY INDEX: 6.3% Survey was conducted June 8. Mortgages are limited to a maximum amount of $240,000. Car-loan rates are for 48-month new-car loans of $16,000 with 20% down For more cities and updated rates, check www.kiplinger, com; click on "Yields & Rates."