Does pre-approving a mortgage affect your credit rating?

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Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner creditors, whom we will always indicate, all opinions are ours. Credible Operations, Inc. NMLS No. 1681276 is referred to herein as “Reliable”.

If you are looking for a new home, pre-approval is a good step. Pre-approval gives you an idea of ​​how much you can borrow and can even give you a competitive edge when you make an offer.

But because the lender does a thorough background check during this process, pre-approval can affect your credit rating.

Here’s how getting pre-approval affects your credit score:

What is pre-approval for a mortgage?

BUT pre-approval of a mortgage – This is a letter from the lender that states how much you can borrow on a home loan. Pre-approval is based on details such as your income, credit history, assets, and debts.

Sample pre-approval letter pg1

During the process, the loan officer will advise preliminary approval documents such as your credit reports, recent paychecks, personal bank statements, and your federal tax returns.

They will use this information to determine if you are suitable for the mortgage and the amount you can get.

Although you can hear the terms pre-approval and pre-qualification are used interchangeably, there are differences between them:

  • Pre-approval of the mortgage: A more thorough analysis of your finances is required to confirm your creditworthiness and determine the amount of credit for which you are eligible.
  • Pre-selection for a mortgage: The lender gives you an interest rate based on the information you give them, usually without documentation.

Why you should get pre-approved

It is always a good idea to get prior approval before buying a house… This is because the pre-approval process helps you:

  • Set a budget: You will be able to set your price range and buy homes within your budget, saving you time.
  • Get organized: Because you will have collected a lot of documents for the official home loan application later this step will help you prepare for the home buying process.
  • Support your purchase proposal: When you’re making an offer, a mortgage pre-approval letter can help you stand out from other buyers, especially in the bidding war.
  • Make a financial plan: If you are not eligible for prior approval, you can find out why and make a plan to improve your finances.

Reliable pre-approval tool for mortgages

How pre-approval affects your loan

There are many benefits to pre-approval, but there is one drawback: it can affect your credit. This is because you give the mortgage lender permission to view your credit reports from three major credit bureaus – Experian, TransUnion, and Equifax – and receive your credit ratings.

When a person or company takes your loan, a mark known as a request appears on your credit reports. Here’s the difference between the two types of requests and when they can affect your credit:

  1. BUT hard loan request occurs when a lender checks your loan in order to make a loan decision. The request will be recorded on your credit reports and may temporarily affect your credit ratings as they are associated with new debt. This usually happens with the traditional pre-approval of the mortgage.
  2. BUT soft loan requeston the other hand, occurs when the lender only wants to provide a quote for the rate. Soft credit checks will not affect your credit ratings because you are not applying for a loan.

When you request personalized bids and generate simplified prior approval letter from Credible, you are allowing a soft request that does not affect your credit score. If you decide to continue working with a specific lender, the lender will go through a tough loan request.

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  • Painless mortgage: Create a simplified pre-approval letter today in just a few minutes and see how much home you can afford.

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How Traditional Pre-Approval Affects Your Credit

According to the credit rating company FICO, a single request can lower your credit rating by up to five points, while a few complex inquiries can have a greater impact.

And if you have a short credit history or few accounts, the request can do more damage to your account.

Tip: FICO says it treats all mortgage applications, including pre-approval, within a 45-day window as one credit event. Therefore, if you complete all mortgage pre-approvals within this time period, you may want to restrict your loan from obtaining a loan.

How long will your loan be subject to traditional pre-approval

Serious inquiries can stay on your credit reports for up to two years, but their impact diminishes over time. FICO claims that it only considers requests from the past 12 months when calculating your scores.

To reduce the impact of tough inquiries, you can request pre-approval and apply for mortgages at short notice.

Credible’s pre-approval process won’t hurt your credit history in the least

Credible’s pre-approval process uses soft leverage so it won’t affect your loan like traditional mortgage pre-approval. You will also be able to compare the details of a home loan from several lenders at the same time, saving you time and money.

Traditional lenders Credible
How long does it take? 1 to 3 days 3 minutes
Credit check Hard credit attraction
(negative impact on your credit)
Soft credit
(does not affect your credit)
Online process Usually minimal; instead handled by visiting a branch in person or by phone with a licensed loan officer 100% online
Compare multiple lenders? No, visit multiple lenders to get multiple pre-approval letters. Yes, pre-approval by several lenders at once
Multiple pre-approval emails for additional property offers? No, another request must be made to the lender for a new pre-approval letter. Yes, instantly create additional letters with an individual loan amount

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