By Tyler Kraupp, Good Co. Broker CEO/Founder
When it comes to shopping for a new home, a credit check is a standard procedure. But did you know that multiple hard credit inquiries can negatively affect your credit score? Fortunately, many lenders are able to conduct soft inquiries to determine your eligibility without impacting your credit score. This can be a big differentiator when shopping for a home loan provider.
A hard inquiry, also known as a hard pull, is an information request for your full credit report. This is typically performed for credit approvals and background checks. When you apply for a specific loan, the lender will hard pull your credit report to verify and assess your financial health. However, multiple hard inquiries in quick succession can be seen as a red flag to potential lenders, as it could suggest you are financially unstable and present a higher risk of defaulting.
On the other hand, a soft inquiry, or soft pull, only gathers the bare essentials of your financial record and does not affect your credit score. Soft inquiries allow lenders to check your eligibility prior to a formal application. While they will show up on your credit report, soft checks are only visible to the individual owner. This makes them a useful midpoint when browsing for loans, and can help you find pre-qualified offers with a high chance of final approval from the lender.
Pre-qualified home loan offers use soft inquiries to the advantage of both parties. Coming to the table with a pre-approval from a home loan lender can make your offer that much stronger to get your dream home and give you the necessary negotiating power in this ever changing buyers market. At Good Co. Broker, we are able to run a soft credit pull and use that to get you a full pre-approval to submit an offer all the way to the closing table.
In conclusion, a credit check is necessary when applying for a home loan, but it’s important to understand the difference between hard and soft inquiries and how each plays into your home ownership goals. Multiple hard inquiries can negatively affect your credit score, while soft inquiries allow you to determine your eligibility without any impact.
For more information, visit www.goodcobroker.com.