When you need to take out a mortgage to buy a home, your credit score will generally be a significant factor in getting approved. A strong credit score tells your lender that you’re a reliable borrower with a history of repaying debts on time. On the other hand, a poor credit score correlates to a higher risk of default for the lender..
That’s why it’s essential to do your best to keep your credit score in great shape – not just for the sake of being able to get a mortgage, but to get approved for other loans, too.
The approach you take when shopping for a mortgage could make a difference in how it impacts your credit score. It’s essential to understand the difference between a soft pull and a hard pull in the context of credit scores, and how shopping for a mortgage strategically could help you avoid negative impacts to your credit score.
Key Takeaways:
- A soft pull doesn’t result in credit score damage, but a hard pull could lower your credit score by a few points.
- Mortgage shopping within a short time frame could help you avoid too many hard pulls on your credit.
- Getting prequalified for a mortgage could help you approach your search strategically without having a hard pull on your credit.
Soft Pull Vs. Hard Pull: Know The Difference
A pull on your credit report is also called a credit inquiry. It means your credit report is being reviewed to determine whether you qualify to borrow money or to receive an offer to borrow money. You might also pull your own credit report before applying for a large loan, such as a mortgage.
Does A Soft Pull Affect Credit?
A soft credit pull, or soft inquiry, occurs when your credit is checked for informational or prequalification purposes. A soft credit pull might happen when you:
- Check your own credit report
- Get prequalified for a loan or credit card
- Get background-checked by a potential employer
You may be wondering, “Does a soft pull affect credit?” The main difference between a soft pull and a hard pull on your credit is that a soft pull does not affect your credit score.
How A Hard Credit Pull Works
A hard credit pull, or hard inquiry, occurs when a lender pulls your credit report after you’ve applied to borrow money. A hard pull might occur when you:
- Apply for a mortgage
- Apply for an auto loan
- Apply for a personal loan
- Apply for a credit card
A hard credit pull will typically lower your credit score by fewer than five points, according to FICO. The reason your credit score will probably drop a bit is that a hard pull suggests that you’re about to borrow money in some shape or form.
When you apply for different types of credit, such as a credit card, an auto loan and a personal loan, spacing out those applications helps minimize hard pulls and protects your credit score.
But mortgage shopping works differently. If you apply with multiple lenders within a short window, those inquiries are generally treated as a single hard pull, since they’re all for the same loan type. That means shopping around for the best mortgage rate doesn’t have to damage your credit, as long as you do it strategically.
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How To Shop For A Mortgage Without Hurting Your Credit Score
Because a hard pull on your credit can cause your score to drop, it’s important to minimize hard pulls. At the same time, when you’re looking to get a mortgage, it’s important to shop around and apply with different lenders. When you’re borrowing a sum that large, you need options so you can compare your choices and see which deal is the best – especially since different lenders charge different rates and closing costs.
The good news is that there are ways you can shop for a mortgage while minimizing damage to your credit score.
Do All Of Your Mortgage Shopping In A Short Period Of Time
When you apply for a mortgage, it counts as a hard credit inquiry. But if you apply with multiple lenders within the same short time frame, those various applications will generally be treated as a single hard inquiry, since they’re all for the same type of loan.
FICO typically counts all mortgage-related inquiries as a single inquiry if they’re made within the same 14- to 45-day time frame. VantageScore generally groups all mortgage-related hard inquiries into a single inquiry if they’re made within 14 days.
Do some initial research and make a list of all of the lenders you want to apply with. Then make sure to submit your applications within the appropriate window.
Get Prequalified For A Mortgage Before You Apply
Getting prequalified for a mortgage could give you a sense of whether you’re able to get a mortgage based on your income, credit score and the amount you wish to borrow. The nice thing about getting prequalified for a mortgage is that it generally counts as a soft inquiry, so it won’t cause your credit score to drop. However, it’s important to note that some lenders may conduct a hard inquiry during prequalification – confirm with your lender to understand the credit implication.
Keep in mind that getting prequalified for a mortgage is not the same thing as getting approved. You’ll still need to officially apply for a mortgage if you want to borrow to buy a home.
Limit Your Applications To Mortgages Only
Any time you apply for a loan or some type of credit, it can affect your credit score. If you know you’re shopping around for a mortgage, avoid applying for other types of credit, such as loans or credit cards, to minimize hard inquiries.
Avoiding other loan or credit card applications could also increase your chances of getting approved for a mortgage. If mortgage lenders see other hard inquiries, they may be more hesitant to lend you money out of fear that you won’t be able to keep up with all of your debt – even if you have a good credit score. Plus, the more loans or credit cards you have, the more your debt-to-income ratio (DTI) might increase. A higher DTI could make it harder to qualify for a mortgage.
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How Long Does A Hard Inquiry Stay On Your Report?
A hard inquiry can remain on your credit report for up to 2 years. But it usually impacts your credit score for only about 12 months.
That means if you’ve recently applied for several loans or credit cards and you’re worried about how that will affect your mortgage eligibility, you may want to wait to apply for a home loan until those inquiries no longer affect your eligibility.
It’s a good idea to monitor your credit report if you’re gearing up to buy a home. You can get a free copy of your credit report every week from each of the three major reporting bureaus: Experian, Equifax and TransUnion.
When you check your credit report for inquiries, you’ll typically see a section for hard pulls and a separate section for soft pulls. You may not recognize every single soft pull, but if that’s the case, don’t panic.
Companies do not need your permission to do a soft pull on your credit. It’s common for companies to do a soft pull to see if you’re a good candidate for their product, so that they can send you promotional information.
On the other hand, if you see a hard inquiry you don’t recognize, dispute it with the credit bureau (it may reflect fraud).
In some cases, seeing a hard pull on your credit report you don’t recognize could be an indication that someone has stolen your identity and is trying to open an account in your name, since lenders generally need your consent to do a hard inquiry. You can find out more information by contacting the company associated with the hard inquiry you don’t recognize.
If you suspect that fraud is at play, you may want to freeze your credit, which won’t necessarily be a barrier to getting a mortgage.
If your credit is frozen and you’re applying for a mortgage, ask each lender when they plan to pull your credit. At that point, you can temporarily lift your credit freeze.
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The Bottom Line: Soft Pull Vs. Hard Pull
Both a soft pull and a hard pull mean someone is looking at your credit report to get information on your credit history and risk profile as a borrower. A soft pull won’t lower your credit score, but a hard pull will.
If you want to minimize damage to your credit score while shopping around for a mortgage, do your rate shopping quickly. Not only might this help you avoid a hit to your credit score, but it might also make the process of getting a mortgage easier and less stressful for you.
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Maurie Backman
Maurie Backman has more than a decade of experience covering personal finance topics that include mortgages, loans, retirement, Social Security, and investing. Prior to becoming a full-time writer, she worked in the financial industry as well as in product design and marketing. Maurie holds a bachelor's degree from Binghamton University, where she studied creative writing and finance. She was happy to combine her two areas of study into a career that allows her to educate consumers on a host of financial topics.
