Understanding Soft Pulls and Hard Pulls: What They Mean for Your Mortgage Application

When you're navigating the mortgage process, your credit score is one of the most critical factors lenders consider. A strong credit score can help you secure a lower interest rate, saving you thousands of dollars over the life of your loan. But did you know that the way your credit is checked—whether through a "soft pull" or a "hard pull"—can impact your score? Understanding the difference between these two types of credit inquiries is essential, especially when applying for a mortgage.

What is a Soft Pull?

A soft pull occurs when you or someone else checks your credit report for informational purposes. This type of inquiry is common when:

• You check your own credit report: Many people regularly review their credit reports to monitor their financial health. Soft pulls allow you to do this without affecting your credit score.
• Pre-approved credit offers: When companies pre-approve you for credit cards or loans, they perform a soft pull to gauge your creditworthiness.
• Background checks: Employers may perform a soft pull as part of a background check during the hiring process.

Impact on Your Credit Score: The good news is that soft pulls do not affect your credit score. You can check your credit report as many times as you like without any negative consequences. These inquiries do not show up on your credit report when viewed by lenders, so they have no impact on your ability to qualify for a mortgage.

What is a Hard Pull?

A hard pull, also known as a hard inquiry, occurs when a lender or creditor checks your credit report as part of the approval process for a loan or credit card. This type of inquiry is typically triggered when:

• You apply for a mortgage: Lenders perform a hard pull to evaluate your creditworthiness before offering you a mortgage.
• You apply for a car loan: Just like with a mortgage, lenders will perform a hard inquiry when you apply for an auto loan.
• You apply for a credit card: Each time you apply for a new credit card, a hard pull is performed to assess your ability to manage additional credit.

Impact on Your Credit Score: Hard pulls can affect your credit score, though the impact is typically minimal—usually a decrease of up to 3 points per inquiry. However, multiple hard inquiries in a short period can have a cumulative effect. Fortunately, credit scoring models like FICO recognize when you're rate-shopping for a mortgage, auto loan, or student loan. If multiple hard inquiries for the same type of loan occur within a 30- to 45-day window, they are generally treated as a single inquiry, minimizing the impact on your credit score.

The Implications of Soft and Hard Pulls on Your Mortgage Application

When applying for a mortgage, it's crucial to be mindful of how credit inquiries can affect your score:

1. Rate Shopping: If you're comparing mortgage rates from different lenders, try to submit all your applications within a short timeframe (30-45 days). This way, the multiple hard inquiries will be grouped as a single inquiry on your credit report, minimizing the impact on your score.
2. Monitoring Your Credit: Use soft pulls to monitor your credit report regularly. This allows you to spot any errors or discrepancies that could negatively affect your mortgage application. Remember, soft pulls do not impact your score, so you can check your report as often as needed.
3. Timing Your Applications: Avoid applying for new credit cards, car loans, or other forms of credit shortly before or during the mortgage application process. Each new application triggers a hard pull, which could lower your credit score and affect your mortgage terms.

Key Takeaways

• Soft pulls are safe for monitoring your credit and have no impact on your credit score. Use them to stay informed about your financial health.
• Hard pulls are necessary for loan applications, including mortgages, and can slightly lower your credit score. Plan your applications carefully to minimize their impact.
• When applying for a mortgage, focus on maintaining a healthy credit score by avoiding unnecessary hard inquiries and using soft pulls to keep track of your credit status.

At emortgages.com, we're here to guide you through the mortgage process, helping you understand how your credit score and credit inquiries affect your application. If you're ready to start your journey towards homeownership, contact Jehoshua Shapiro, your trusted loan officer in Petaluma, CA, at 707-235-2812 or js@emortgages.com. We're here to help you every step of the way.

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