Woman reviewing credit report for mortgage pre-approval with laptop and calculator

Does mortgage pre-approval affect your credit score?

By never missing a payment and lowering your debt, you’ve taken the necessary steps to build a strong credit score. That’s because you know the better your credit score, the more likely you’ll be approved for a home loan at a lower interest rate. Now that you’re ready to buy a place of your own, you may be wondering if getting pre-approved for a mortgage will affect the credit score you’ve worked so hard to improve. Learn how mortgage pre-approval affects your credit score before starting your home search so you understand what to expect during the buying process.

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

You may have heard a credit check described as a hard or soft inquiry. Both are referring to the act of pulling your credit report to assess your financial behavior. However, there are significant differences between the two.

  • Soft inquiry on your credit report

    When you or someone else checks your credit report but doesn’t submit a new application for credit, it’s considered a soft inquiry or “soft pull.” Examples include employers checking on potential new hires or credit card companies looking for pre-qualified customers. According to the credit reporting company Experian, these types of inquiries won’t affect your credit score.

  • Hard inquiry on your credit report

    When you actively apply for a new line of credit, such as a credit card or an auto loan, the lender requests your credit report. Your credit score and the financial information on your credit report determine if you’ll be approved by the lender, as well as the terms of your loan. This credit pull is considered a hard inquiry or “hard pull.” Unlike soft inquiries, hard inquiries can negatively impact your credit score. “But the impact is typically small, and credit scores tend to rebound within a few months if no new negative information gets added to your credit report,” according to Experian.

Is a mortgage pre-approval a hard inquiry?

Because the process involves submitting a mortgage loan application, there’s no way to avoid the hard credit inquiry triggered by the mortgage pre-approval process. To determine whether or not you qualify for a mortgage, an underwriter must evaluate your credit and look at your earnings, debt and savings.

Will getting pre-approved for a mortgage affect my credit score?

Although getting pre-approved may be a slight ding to your credit score, the upside to losing a few points for a few months far outweighs the risks. Pre-approval is a conditional written commitment from your mortgage lender with the maximum loan amount you’re pre-approved to borrow. This is a critical step in the homebuying process because it provides clarity on the home you may be able to afford, as well as how much you may need for a down payment. Most sellers give preference to offers backed with pre-approval letters. You don’t want to lose a bidding war on your ideal home because you failed to get pre-approved. Guild’s Credit Approval Protection* program can also give your bid a boost because it gives added confidence in Guild’s pre-approval process. If Guild issues a preliminary underwriting credit approval and is then unable to close on the borrower’s loan, Guild will pay the borrower up to $1,000 for inspections, appraisals and relocation expenses incurred. Guild will also reimburse the borrower for their lost earnest money deposit, up to $5,000. From pre-approval to closing, Guild Mortgage advisors are here to guide you through your homebuying journey. Connect with an experienced loan officer today.

*For full terms and conditions, visit: guildmortgage.com/cap-hbe-terms/

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.