May 3, 2022 by Leave a comment

When you’re searching for your new home, a mortgage pre-approval will not only tell you what you can afford but can also help you stand out as a serious buyer. However, you’ll want to protect your credit score while you’re shopping for the best rate.

So, does a mortgage pre-approval affect credit score? Here’s how getting pre-approved impacts your credit score and how to shop for a mortgage without damaging your credit.

What Does It Mean to Get Pre-Approved for a Mortgage?

A mortgage pre-approval is a letter from the lender saying that you are generally qualified for a mortgage loan. The lender will evaluate your income, debt, assets, and credit history and determine what interest rate you qualify for and how much money you can borrow based on the loan program you’re applying for. 

Although a mortgage pre-approval doesn’t guarantee a loan offer, including a pre-approval letter with your offer does make your bid stronger. It shows the seller that you are a serious buyer and that you have good enough credit to qualify for a home loan.

How Does a Mortgage Pre-Approval Affect Credit Score?

By getting pre-approved for a mortgage, you’re authorizing the lender to pull your credit report from the three main credit bureaus — Experian, TransUnion, and Equifax. When a lender requests to review your credit report, it’s recorded as a hard inquiry.

Hard inquiries will temporarily affect your credit score and will stay on your credit report for about two years. Inquiries tell lenders how frequently you apply for credit.

Credit inquiries have a small impact on your credit score. While the impact will vary from person to person based on credit history, one inquiry will lower your score by up to five points, according to FICO. Inquiries play a minor role in assessing risk and only account for 10% of your FICO credit score.

Mortgage shopping is generally seen as a positive financial move by credit scoring models, and multiple credit checks from mortgage lenders within a 14 to 45-day window will only be recorded as a single inquiry. This allows buyers to shop around and get mortgage pre-approval from several lenders without their credit score taking a significant hit.

There are also soft inquiries, but these generally occur when a lender provides a rate quote or when you view your own credit report. Soft inquiries don’t impact your credit score.

Find out if you qualify for a mortgage with Total Mortgage. We have branches across the US where you can talk to our mortgage advisors. Find a Total Mortgage branch near you.

Does Getting Prequalified Hurt Your Credit?

A mortgage prequalification is an estimate of what you may be able to borrow on a mortgage using basic financial information. Prequalifications are considered to be less reliable than a mortgage pre-approval because the information is typically not verified. 

Prequalifications usually rely on self-reported information or the lender may do a soft pull on your credit report. If there’s no hard inquiry, then getting prequalified won’t hurt your credit.

Does Applying for a Mortgage Hurt Your Credit Score?

Similar to a mortgage pre-approval, applying for a mortgage involves a hard inquiry on your credit report, which could lower your credit score by a few points. If you fill out multiple mortgage applications within the 14 to 45-day shopping window, then it will only count as a single inquiry.

The mortgage shopping window only applies to credit checks from mortgage lenders or brokers’ credit cards, according to the Consumer Financial Protection Bureau, and other inquiries will show separately on your credit report.

After you close on a new mortgage, your credit score may go down again temporarily. Because of this, it may be difficult to get other loans or with the terms you prefer. You may have to wait several months before applying for a larger loan. 

On the other hand, a mortgage can also help build your credit over the long run if you make timely payments. 

How to Shop for a Mortgage Without Hurting Your Credit?

You can still shop around for the best rate without hurting your credit if you use the right strategy. Here are some times on how to shop for a mortgage without hurting your credit.

  1. Check your credit report: If you check your credit report before applying for a mortgage, you can take steps to improve it or correct any mistakes. This can help put you in the best position to get the lowest rate. You can get a free copy of your credit report from the three major credit bureaus once per year from AnnualCreditReport.com.
  2. Pay down any debt: Paying down debt can improve your debt-to-income ratio, which can also raise your credit score. A better DTI may also qualify you for a bigger mortgage with a lower interest rate.
  3. Pay your bills on time: Payment history makes up 35% of your FICO score, making it the most important determinant of your credit score. Failing to pay bills on time can cause your score to take a significant hit. Late payments can also stay on your credit report for seven years.
  4. Don’t apply for new credit: Multiple inquiries for different types of credit can negatively affect your credit score. Wait until after you close on your mortgage before opening a new credit card or taking out a car loan.
  5. Shop within a short timeframe: Apply for mortgages within the mortgage shopping window to minimize any impact on your credit. However, having one or two inquiries outside of that timeframe isn’t a big concern. It’s generally worth the extra inquiry if it means finding the lowest rate.

Apply for a Mortgage Today with Total Mortgage

Does mortgage pre-approval affect credit score? Yes, but not by much and only for a short period of time. Plus, if you apply for a mortgage within the mortgage shopping window, it will only count as a single inquiry on your credit report.

If you’re looking to buy a home, you can get a free rate quote and apply online with Total Mortgage. Schedule a meeting with one of our mortgage experts to learn more about your options.

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.


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