Does getting pre-approved hurt your credit?

Published August 23, 2021
by Better

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What You’ll Learn

Why lenders check your credit history before deciding whether to offer you credit

The impact a hard credit check (hard inquiry) has on your credit score

Differences between soft credit checks and hard credit checks

The short answer to this question is no (not really). When you apply for any new forms of credit, lenders check your credit history to get an idea of what kind of borrower you’re likely to be based on the way you’ve managed credit in the past. A track history of on-time payments, paid-accounts, and low credit balances give the lender confidence that you’re likely to manage credit well in the future.

When you complete a mortgage pre-approval form, different lenders use one of two ways to check your credit: some use soft credit checks, others use hard credit checks. So, the long answer to this question needs an understanding of both these types of credit inquiries.

What’s a soft credit check?

When a lender does a soft credit check (also known as a soft inquiry) they contact one of the three credit bureaus (Equifax, TransUnion, or Experian) to see your credit score based on previous credit inquiries. It doesn’t impact your credit score or leave a public trace on your credit history. However, if you request a copy of your credit report, you will be able to see what companies have done a soft credit check on you. If you receive a promotional letter from a bank that says you’ve been pre-approved for a new credit card, you can be sure that bank ran a soft credit check on you.

A Better Mortgage pre-approval takes as little as 3 minutes and uses a soft credit check to give you a good idea of how much you can borrow without impacting your credit score.

What’s a hard credit check?

When a lender conducts a hard credit check (also known as a hard inquiry), they review your current credit situation with 1–3 of the credit bureaus to see if you qualify for new credit. A hard credit check can be seen on your credit report by other lenders and typically reduces your credit score by 5 points. Given that credit scores range between 300 and 850, on balance, 5 points makes less than 2% difference.

Credit reporting companies recognize that many people shop around for a mortgage, so even if a lender uses a hard credit check for your pre-approval, there won’t be any further impact to your credit score if you complete multiple mortgage pre-approvals within 45 days. After 2 years, a hard credit check will drop off your credit report entirely.

What’s the difference between a soft inquiry and a hard inquiry?

Unlike soft inquiries, hard inquiries are visible on your credit history because they indicate that a lender is either actively considering offering credit to you or has just done so. A high number of hard credit inquiries on your credit report over a short period of time is cause for concern to a lender because it generally indicates that a borrower is going through financial difficulties or may be planning to make large purchases in the near future.

Soft inquiry / Soft credit check Hard inquiry / Hard credit check
No impact to your credit score Reduces your credit score by 5 points
Not publicly visible on your credit report Remains visible on your credit report for 2 years
May be run by a lender to who wants to send you a pre-approved credit card Indicates that a lender is actively considering extending credit to you (or has just done so)
Multiple soft inquiries are of no concern to lenders (they’re not visible to lenders) Multiple hard inquiries over a short period are a red flag for lenders
A soft inquiry could be run when: A soft inquiry could be run when:
Lenders are deciding whether to send you a pre-approved credit card Lenders process your application for a pre-approved credit card
An employer runs your credit report as part of their employee screening process Credit card companies want to decide whether to increase your credit limit
You check your credit score through an online site like CreditKarma You apply for financing at a car dealership (or another vendor who offers financing)
A debt collector checks your credit report for recent activity You begin the formal mortgage application process (this can occur with some lenders during the pre-application stage)
You request a mortgage pre-approval with some lenders

Get pre-approved with Better Mortgage

Everyone deserves a fair shot at homeownership or a refinance, which is why Better Mortgage works to help you save money and make the process simple, streamlined, and ultra accessible from start to finish. A Better Mortgage pre-approval takes as little as 3 minutes and doesn’t require a hard credit check.

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