What impact can a credit pull can have on your credit score?
There is a lot of misconception about the impact a credit pull can have on your credit score. Credit pulls are categorized as Hard Credit Pulls and Soft Credit Pulls. You might choose to have a soft pull to avoid any effect on your credit score. Soft pulls have no impact on your score at all and are mainly done as a screening process. Soft pulls are generally done by insurance carriers, for promotional offers such as credit card offers, by employers doing background checks, or by utility companies determining the possibility of a security deposit. These types of credit pulls are not necessarily tied to a specific application for credit; therefore, they do not appear as an inquiry on your credit report. Sometimes soft inquiries can even happen without your knowledge.
Since a soft credit pull is not for the specific intent of submitting a loan application, a hard inquiry is required when you apply for credit, such as a mortgage, credit card, or car loan.
Why can’t you use that soft pull for your credit application?
When applying for credit, other lenders/creditors want to know if you have acquired additional debt. Inquiries alert other potential lenders/creditors that you are shopping for credit and might have acquired new debt that they do not see reported yet. You will likely have to explain the reason for an inquiry and inform the potential lender if you did or did not open anything new, and THAT IS OK! You are allowed to shop for terms of credit and will not be “punished” for that shopping.
Relative to the other factors that make up your credit score, inquiries play a minor role. The impact on your score is minimal, and most times, if the pull is for the same purpose in a contained period of time (14-45 days, depending on the bureau and type of credit), the inquiries only count as one pull in the scoring system. Inquiries tend to hurt your score more when you are applying for different types of credit, like car loans, credit cards, and a mortgage, all at the same time. This can be a sign of financial distress, which could be reflected in your score, but again, inquiries play a minor role, and the fear of a hard inquiry should not stop you from shopping for credit terms or applying for credit.
If you prefer to start your mortgage shopping with a soft pull to see what you may qualify for, please call/text 443-631-0215, or cantact one of our Senior Mortgage Professionals who will be happy to assist you.
