What is a Soft Credit Pull for Mortgage?

Jul 5, 2024 | Core Bank, Real Estate

There are many benefits to having a good credit score such as better rates on car insurance, lower credit card interest and having more housing options. Pulling credit for mortgage means that your lender will run your credit report and score when you apply for a loan and before you close on a loan. This will trigger an inquiry that may affect your credit score. Your lender must have your permission to pull your credit reports. You can shop for rates with multiple lenders without further impact to your score if you do it within a 14- to 45-day window.

There are two different types of credit inquiries: a hard credit pull or soft credit pull.

Hard Credit Pull

A hard credit inquiry hard occurs when a lender or creditor accesses your credit report to evaluate your creditworthiness. It may impact your credit scores and stay on your credit reports for about two years, while a soft credit inquiry won’t affect your scores.

Common scenarios for hard inquiries include:

  • Applying for a new credit card – each credit card application results in a hard inquiry.
  • Purchasing or leasing a car – whether you’re getting a loan from a bank or dealership to buy a car, or you’re leasing a car, a hard inquiry is expected.
  • Applying for a mortgage – when you apply for a home loan, the lender performs a hard pull on your credit.
  • Applying for a personal loan – Personal loan lenders also conduct a hard credit pull during the formal application process.

Impact on Credit Score:

Hard inquiries can affect your credit score, but usually only minimally and for a short duration. Each hard inquiry may cause a slight drop in your credit score (typically less than five points). While they’re on your credit report, they are visible to anyone who checks your credit. It’s wise to limit the number of hard inquiries to protect your credit score. If you’re planning a significant financial commitment (like buying a home), consider limiting credit applications for several months.

Soft Credit Inquiry:

Also known as a “soft pull,” a soft inquiry occurs when someone checks your credit unrelated to a specific credit application.

Common scenarios for soft inquiries include:

  • Pre-approved credit offers – when you receive an offer for a pre-approved credit card, it involves a soft inquiry.
  • Background checks – employers, landlords, and insurance companies may perform soft inquiries.
  • Checking your own credit – when you request your credit report, it’s considered a soft pull.

Impact on Credit Score:

Soft inquiries do not affect your credit score. They are typically used for informational purposes and don’t impact your creditworthiness. Soft inquiries are not visible to other creditors or lenders.

In summary, hard inquiries are associated with credit applications and can impact your credit score temporarily, while soft inquiries are non-credit-related checks that do not affect your score. It’s essential to understand the distinction and manage your credit inquiries wisely!

We recommend checking your credit reports often. If you spot any errors, such as a hard inquiry that occurred without your permission, consider disputing it with the credit bureau. You may also contact the Consumer Financial Protection Bureau, or CFPB, for further assistance.

This could be a sign of identity theft, according to Experian, one of the three major credit bureaus. At the very least, you’ll want to look into it and understand what’s going on. Keep in mind, you can only dispute hard inquiries that occur without your permission. 

If your credit score is going up, great work – try to maintain or grow that score. FICO®, which is one credit-scoring company, says scores between 670 and 739 qualify as good. The longer you have had credit, the better it is for your credit score. Leave your oldest accounts open since they help increase your credit age and build good credit.

Remember, working with a knowledgeable mortgage professional can guide you through the process and answer any specific questions you may have. Core Bank’s team of lenders are committed to helping you achieve your dreams, whether you’re ready to buy, build or refinance your home. Contact someone from our team and apply today!