There are many factors that affect your credit score. Late payments, unpaid debts, large numbers of credit cards with large balances, and all can have a negative effect on your credit score. Various types of credit inquiries have different effects on your personal credit score. Mortgage pre-approvals do not affect your credit score unless you actually follow through and fill out an application for the mortgage you are seeking. Being pre-approved for a mortgage doesn’t mean you will get the mortgage, it simply means that the lender believes you have a good chance at being approved based upon the information that is listed in your credit file. But, once again, pre-approval is not a guarantee that you will get the mortgage.
There are two types of credit inquiries that are used by lenders. Each type has unique effects on your credit score because each type of inquiry affects your credit score in a different way. These different inquiries fall under two main categories and are called a soft inquiry and a hard inquiry.
Soft Inquiries – A soft inquiry is what a lender will base their decision on whether or not they feel you will qualify for a mortgage. A soft inquiry can be used when applying for a mortgage but can also be used if a lender is performing an account review or a debt collector is checking to see if there is any recent credit activity on a person’s credit report. These soft inquiries are only seen by the consumer and other lenders cannot see this activity. Because it is this type of inquiry, it does not affect an individual’s credit score in a negative way.
Hard Inquiries – A hard inquiry is the kind of inquiry where an individual actually applies for a credit card, a loan for a car, or a mortgage for a property. Each time there is a hard inquiry listed on your credit report, there is an effect on your credit report. The effect is minor for each hard inquiry but there still is an effect. A potential lender will see each hard inquiry on a person’s credit report. There have been instances where a lender will deny a loan if there are have been a large number of hard inquiries on a person’s credit report because it can indicate that the individual is going through financial difficulties. Hard inquiries are deleted from your credit report after two years.
In summary, getting a pre-approval, based upon a soft inquiry, will not negatively affect your credit score. The only time that there is an effect on your credit history is when you actually apply with the lender by way of a hard inquir. Contact the experts at AKAL MORTGAGES to ask any questions you have about getting pre-approved or if you would like to proceed with getting pre-approved. At AKAL MORTGAGES, we are experts in our field and we will work hard at finding the right solution for you.
When we say YES! We stand behind our promise.®™