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Could Mortgage Pre-Approval Hurt Your Credit Score?

Woman and man reviewing paperworkIn the aftermath of the credit crunch and the global recession, it is more important than ever to keep track of your credit score.  Banks are more careful about extending credit, making a good credit score the foundation of major purchases like a new car or a first home.  Frequent credit inquiries may negatively impact your credit score.  A single inquiry linked to a request for credit can impact your score by as much as five points.  Subsequent inquiries can also impact your score.  Since home buyers need a good credit score to qualify for a mortgage, searching for mortgage pre-approval can be nerve-wracking. 

Download our Road to Mortgage Ready Credit ebook here.

 

How many inquiries are too many?  How long do inquiries affect your score?  Is a pre-approval for a mortgage loan worth the possible repercussions to your credit score?

Not All Inquiries Impact Your Score

Before deciding not to go for a mortgage pre-approval, you should know which types of inquiries actually affect your score.  "Soft" inquiries, or those that don't come with a loan or credit offer attached, don't affect your credit score at all.  Employers use soft inquiries to help make determinations about hiring, and you might make such an inquiry to look at your current score. 

 

"Hard" credit inquiries usually follow a request for credit.  Additional lines of credit or added monthly expenses affect a consumers ability to repay debts, which is why hard credit inquiries affect credit scores.  Loan pre-approvals can fall under a special rule.  Lenders and credit analysts understand the importance of rate shopping on a large purchase.  If you have various lenders all make their inquiries within a two week time span, all of those inquiries are lumped together and only counted negatively, once.  This allows you to apply for pre-approval from several lenders, without worrying about the impact on your credit score.

Should You Get a Pre-Approval?

Home buying for the first time is stressful, but well worth it.  Owning your own home is a great investment.  Finding the right home can take time, but closing on the property doesn't have to.  Mortgage pre-approval helps you get everything lined up, so closing on your new home can take place in just a few weeks, rather than dragging on for months.  Repeated inquiries can negatively impact your credit score, but having a lender pre-selected and on-board saves you from last minute hassles and failed closings.

 

Now you know that you can shop around a bit during the pre-approval process. Find the best rate and the best service (meaning can the lender close your loan in a timely manner). Doing so will not hurt your credit score. However, be sure not to go looking for other lines of credit during this time. Getting store credit, an auto loan and credit cards will hurt your credit.

 

So if you're considering buying a house, it's time to get your mortgage pre-approval underway. Make sure you have a pre-approval letter before you go house hunting. This will make the process run more smoothly. See if you're pre-approved with AmeriFirst Home Mortgage.  Click the button below to begin the process.

Pre-approve me

 

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