How Mortgage Prequalification Can Affect Your Credit Score

It’s a common worry that getting prequalified for a mortgage will hurt your credit score. While any credit inquiry feels significant, a prequalification is typically a soft pull that doesn't.

1. Initial Prequalification: You provide a lender with self-reported financial information. The lender performs a soft credit inquiry, which does not impact your credit score, to give you a preliminary estimate of your borrowing power.
2. Transition to Pre-Approval: To get a firm commitment, you’ll move to the pre-approval stage. This requires submitting detailed financial documents for verification, which authorizes the lender to perform a hard credit inquiry.
3. The Hard Inquiry: This is the point where your credit score can be affected. A hard inquiry, or "hard pull," is officially recorded on your credit report and can cause a temporary, minor dip in your score.
4. Rate Shopping Window: Credit scoring models typically treat multiple mortgage inquiries within a short period (usually 14-45 days) as a single event. This allows you to shop for the best rates from different lenders without taking multiple hits to your score.

How Much Will Mortgage Prequalification Affect Your Credit Score?

The impact of a mortgage prequalification on your credit score depends on the type of credit check performed. Here are the key factors to consider when starting the home-buying process.

• Hard vs. Soft Inquiry. A soft inquiry for prequalification typically has no effect on your credit score. However, a hard inquiry for preapproval can cause a small, temporary dip of a few points.
• Rate Shopping Window. Multiple hard inquiries for a mortgage within a short period, usually 14-45 days, are often treated as a single event. This allows you to shop for rates without significantly harming your score.
• Minor and Temporary Impact. The drop from a single hard inquiry is usually less than five points. This effect is temporary and its influence on your score lessens over time, often within a few months.

How You Can Avoid Mortgage Prequalification Affecting Your Credit Score

Seek Lenders Who Use Soft Inquiries

Many lenders offer prequalification using a soft credit pull, which does not affect your credit score. This initial check provides a solid estimate of your borrowing power without the commitment or impact of a hard inquiry, making it a risk-free first step for prospective homebuyers.

Utilize the Rate-Shopping Window

Credit scoring models typically group multiple mortgage inquiries within a 14 to 45-day period as a single event. By submitting all your applications within this timeframe, you can shop for the best rates while minimizing the impact on your credit score to just one hard pull.

Consult a Mortgage Broker

A mortgage broker can pull your credit once and submit your profile to multiple lenders on your behalf. This approach streamlines the process, allowing you to access various loan options with only a single hard inquiry, effectively protecting your score while you compare different offers.

Choose the Right Card to Mortgage Prequalification

Improving your credit score is entirely possible and achievable through consistent, positive financial habits. In fact, an expert guide suggests that most people can see meaningful changes within three to six months of dedicated effort.

• Establish automatic bill payments. Your payment history is the most significant factor in your score, so ensuring every bill is paid on time is a critical first step.
• Reduce your credit utilization ratio. Aim to use less than 30% of your available credit, as high balances can negatively impact your score.
• Monitor your credit reports. Regularly check your reports from Experian, TransUnion, and Equifax to identify and dispute any errors or fraudulent activity.
• Become an authorized user. Being added to a credit card account with a long, positive history can help improve your own credit profile.
• Limit hard inquiries. Avoid applying for too much new credit at once, as multiple hard inquiries in a short period can temporarily lower your score.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as revolving credit cards and installment loans.

The Bottom Line

A mortgage prequalification typically involves a soft credit inquiry, which does not affect your credit score. It provides a preliminary estimate of your borrowing capacity, unlike a preapproval's hard credit check.

Frequently Asked Questions

Does getting prequalified for a mortgage hurt my credit score?

Typically, no. Most lenders use a soft credit inquiry for prequalification, which does not impact your credit score. It's a preliminary review of your finances.

How many lenders can I get prequalified with?

You can get prequalified with multiple lenders. Since these are usually soft inquiries, you can shop for the best rates without negatively affecting your credit score.

Is a prequalification a hard or soft credit check?

Prequalification is almost always a soft inquiry. A pre-approval, the next step in the mortgage process, typically requires a hard inquiry, which can slightly lower your score.