Does Mortgage Pre-Approval Affect Your Credit Score? What Homebuyers Should Know
When it comes to buying a home, one of the first steps is getting pre-approved for a mortgage. This process involves a lender reviewing your credit history, income, and assets to determine how much they are willing to lend you for a home loan. But many homebuyers wonder, does getting pre-approved hurt your credit score?
The short answer is no, getting pre-approved for a mortgage does not hurt your credit score. However, there are some important factors to consider when it comes to mortgage inquiries and how they can impact your credit score. In this article, we will dive into the details of how mortgage inquiries work, how rate shopping counts, and how to limit any potential impact on your credit score.
How Mortgage Inquiries Work
When you apply for a mortgage, the lender will pull your credit report to assess your creditworthiness. This is known as a hard inquiry and it can temporarily lower your credit score by a few points. However, the impact of a hard inquiry is minimal and typically only lasts for a few months.
It’s important to note that not all inquiries are created equal. There are two types of inquiries that can appear on your credit report: hard inquiries and soft inquiries. Hard inquiries, as mentioned above, occur when a lender pulls your credit report for the purpose of evaluating your creditworthiness. Soft inquiries, on the other hand, occur when you check your own credit report or when a lender pre-approves you for a credit offer.
The good news is that soft inquiries do not impact your credit score at all. So, if you are worried about the impact of a hard inquiry on your credit score, you can rest easy knowing that checking your own credit report or getting pre-approved by a lender will not hurt your score.
How Rate Shopping Counts
One of the biggest concerns for homebuyers is the impact of multiple mortgage inquiries on their credit score. However, the credit scoring models take into account that people may shop around for the best mortgage rate. As a result, multiple inquiries for the same type of loan within a short period of time are typically counted as one inquiry.
According to FICO, the credit scoring company used by most lenders, inquiries for mortgage loans made within a 45-day period are counted as a single inquiry. This means that you can shop around for the best mortgage rate without worrying about multiple inquiries negatively impacting your credit score.
How to Limit Any Impact on Your Credit Score
While getting pre-approved for a mortgage will not hurt your credit score, there are some steps you can take to limit any potential impact on your score.
First, it’s important to limit the number of mortgage lenders you apply with. Each time a lender pulls your credit report, it can result in a hard inquiry and potentially lower your credit score. Instead, do your research and choose a few reputable lenders to apply with.
Second, try to keep all of your mortgage inquiries within a 45-day period. As mentioned earlier, multiple inquiries for the same type of loan within a short period of time are counted as one inquiry. This will help minimize any potential impact on your credit score.
Lastly, make sure to monitor your credit report regularly. This will allow you to catch any errors or unauthorized inquiries that may be negatively impacting your credit score. If you do find any errors, you can dispute them with the credit reporting agency to have them removed from your report.
In conclusion, getting pre-approved for a mortgage does not hurt your credit score. In fact, it can actually benefit your credit score in the long run by showing that you are a responsible borrower. As long as you limit the number of lenders you apply with and keep your inquiries within a 45-day period, you can shop around for the best mortgage rate without worrying about any negative impact on your credit score.
At Redfin, we understand the importance of getting pre-approved for a mortgage and we are here to help guide you through the process. Our team of experienced agents can connect you with reputable lenders and help you find the perfect home for your needs. So, if you’re ready to take the first step towards homeownership, contact us today and let us help you make your dream of owning a home a reality.
