Getting preapproved for a mortgage is an essential step when buying a home. It shows sellers that you are a serious buyer who has been vetted by a lender. However the preapproval process typically involves a hard inquiry on your credit report which can cause your credit score to drop. For homebuyers concerned about minimizing damage to their scores, is there a way to get preapproved without this risk?
The short answer is no — there is no way to get a true preapproval without a hard credit pull. But you do have alternatives that allow you to explore your home loan options with minimal or no impact to your credit. Here’s what to know about getting preapproved without hurting your credit score.
The Difference Between Preapprovals and Prequalifications
Preapprovals and prequalifications are commonly mixed up, but they are distinct processes with different implications for your credit:
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Preapproval – A lender does a hard credit pull and fully underwrites you. This includes checking your credit report, income, assets and debts. You receive a loan estimate showing the rate and terms you qualify for. A preapproval carries a lot of weight with sellers.
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Prequalification – A lender does a soft credit check and looks at limited financial information provided by you. You receive a prequalification letter estimating what you may qualify for. This holds less weight than a preapproval letter.
The hard pull for a preapproval can knock 5 to 15 points off your credit score The soft pull for a prequalification either has no impact or a negligible one
Is There Such Thing as a Soft Pull Preapproval?
Given the credit score impact, can you get a legitimate preapproval without a hard inquiry? The short answer is no.
By definition, a preapproval requires full underwriting and a hard credit check. Lenders need to vet your credit, income and assets to determine if you’re eligible for a loan.
If a lender claims they do “soft pull preapprovals,” it’s likely just a prequalification being passed off as a preapproval. Proceed with caution, as you want documents that will be accepted by sellers
The only exceptions may be if you have an existing banking relationship with the lender or they can reuse a recent credit check done for another purpose. But in most cases, expect the hard pull.
Strategies to Get Preapproved with Minimal Credit Damage
While preapprovals require hard pulls, you can shop strategically to limit damage to your credit:
1. Compare rates in a short timeframe
If you get preapproved by multiple lenders within 30 to 45 days, the inquiries basically count as one credit check rather than multiple hard hits. Shop around during this period.
2. Start with prequalifications
Get prequalified first to compare options, then narrow it down and get preapproved by one or two top choices. The hard pulls come late in the process.
3. Check your credit reports first
Make sure all your credit reports are accurate before applying. This way you can dispute errors that may be dragging your score down.
4. Hold off applying for new credit
New credit card applications can also lower your score, so avoid them while mortgage shopping. Wait until after you close.
5. Pay down balances
Reducing credit card balances can boost your score, improving your chances of the best mortgage rates. Pay down balances if possible.
6. Add yourself as an authorized user
If a family member has great credit, you may be able to raise your score by becoming an authorized user on their oldest credit card.
7. Choose lenders that offer rate locks
Rate locks let you lock in an interest rate for 30 to 60 days while shopping. This prevents your rate from going up while preapproving.
Improve Your Credit Score Before Shopping for a Mortgage
Beyond minimizing damage while shopping, also focus on boosting your credit score in the months prior to applying for a mortgage. A higher score qualifies you for better mortgage rates, saving significantly on interest over the long run.
Here are some tips for improving your credit score before getting a mortgage:
- Check all three credit reports for errors and dispute any inaccurate information.
- Pay all bills on time, including utilities and cell phone bills. Payment history is a big factor.
- Pay down credit card and loan balances. Lower balances help your credit utilization ratio.
- Avoid applying for new credit cards or loans. Too many hard inquiries in a short period can lower your score.
- Come current on any past due accounts. Settle collection accounts if possible.
- Become an authorized user on a family member’s old credit card if they’ve always paid on time.
The higher you can boost your credit score beforehand, the better your chances of qualifying for a low mortgage rate. Keep in mind interest rates tend to fluctuate daily. So shop armed with the highest credit score possible.
Frequently Asked Questions (FAQ)
Below are answers to some common questions homebuyers have about preapprovals and protecting their credit when getting a mortgage:
How many mortgage lenders can you apply with before it hurts your credit?
You can apply with multiple lenders in a 45 day period and it will only count as one hard inquiry on your credit report. So shop around within a 1 to 1.5 month timeframe.
Is a prequalification as good as a preapproval when making an offer?
No. Most sellers want to see a preapproval letter. Prequalifications hold less weight since no hard credit check was done.
How long do mortgage inquiries stay on your credit report?
Mortgage inquiries may show up on your credit report for 12 to 24 months, but only impact your score significantly for about a year. After a year, the effect diminishes.
Can credit monitoring services see soft pull prequalifications?
Yes. While it doesn’t affect your score, a soft pull prequalification will show up on credit monitoring platform alerts. Hard pull preapprovals will be visible as well.
How much does a mortgage preapproval affect your credit score?
A mortgage preapproval typically causes a 5 to 15 point drop in your credit score. It depends on your specific credit profile and history. Those with excellent credit may only see a 5 point drop.
Is it better to pay down student loans or credit cards before getting a mortgage?
Pay down whichever has the higher monthly payment. Mortgage lenders look at your debt-to-income ratio. Lower loan payments can improve your DTI just as much or more than credit cards.
Summary
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Get prequalified first to compare options using soft pulls only.
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Then get preapproved by your top 1 or 2 lender picks within a 45 day period to limit hard inquiries.
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Check your credit reports for accuracy and improve your score prior to applying.
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Hold off applying for new credit during the mortgage process.
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Pay down debts and balances to boost your credit utilization.
While there is no way around the hard pull for preapproval, following the right process can help restrict score drops to a minimal level. Show sellers you’re ready to buy and still get approved for the best possible mortgage rate.
How to prequalify for a home loan online
Getting prequalified online is quick and simple. Just provide the following information:
- The city and state where you are looking to buy
- For a home purchase, the estimated purchase price and down payment
- For a refinance, the estimated home value and how much you currently owe
- Your annual income, date of birth, current address, and contact information
We’ll use that information, along with your credit rating and monthly debt, to calculate the loan amount, interest rate, and monthly payment you could qualify for—all in just a few minutes without affecting your credit score.
No. When we check your credit for a mortgage prequalification, its considered a “soft” credit inquiry, which does not affect your credit score.
If you decide to move forward after prequalifying, well ask your permission before doing a “hard” credit inquiry later in the process.
No documents or fees are required for a mortgage prequalification. Thats one reason why a prequalification is just an estimate: its based on financial information that hasnt been documented and verified.
Later on, if you decide to complete a full mortgage application, your home mortgage consultant and loan processor will let you know exactly what documents to provide.
Prequalification and preapproval actually have more similarities than differences:
- Neither comes with any fees or obligations.
- Neither one is a commitment to lend.
- Both provide an estimate of how much you could borrow to buy a home.
- Both base that estimate on factors like your debt-to-income ratio, how much you have for a down payment, and your credit history.
The key difference is that a preapproval is a more accurate and reliable estimate based on a more complete view of your credit. Thats because when you prequalify, we perform a “soft” credit inquiry, which gives us information about your credit history and monthly debts, but this doesnt provide as much detail as a “hard” credit inquiry, which is required for a preapproval.
Your preapproval also comes with a PriorityBuyerSM Preapproval Letter that you and your agent can give to sellers when you make an offer, so they know youre a serious buyer.
If youre not sure which option is right for you, start by getting prequalified online. It only takes a few minutes, and afterward you can easily take the next step and let us know youd like to get preapproved.
A prequalification doesnt come with an expiration date. On the other hand, the more time that passes after getting prequalified, the more likely it is that something could change that affects your estimated loan amount.
When you get prequalified, we estimate how much you could borrow based on your income, debts, credit, and down payment amount at that moment in time. If all those things stay the same, the amount you qualify for shouldnt change dramatically.
If things do change, dont worry — you can always come back and repeat the process to double check your results. Getting prequalified online with Wells Fargo is quick and simple, costs you nothing, and doesnt affect your credit score, no matter how many times you do it.
What kind of loan do you want to prequalify for?
A mortgage prequalification is a quick and simple way to find out how much you could borrow, and what your estimated rate and payment would be.