Buying a home is often the largest purchase decision people will make in their lives. When going through the mortgage process, lenders use certain metrics like soft credit pulls and hard credit pulls to gain insight about your ability to repay the loan. There are multiple ways that lenders can pull a borrower’s credit, and sometimes doing a soft credit pull is the most advantageous option for a borrower.
Hard Credit Pull vs. Soft Credit Pull
Credit pulls are also referred to as credit inquiries or credit checks. There are two different types of credit inquiries: hard credit pulls and soft credit pulls.
HARD CREDIT PULL
A lender will need to do a hard inquiry of your credit before finishing the loan process. When they do this, a few things will happen:
1. Your credit score may fall slightly due to the hard inquiry being pulled.
This will stay on your credit report for around two years, so multiple hard credit pulls can be damaging to your overall score. That’s why it is good to try to only undergo this process with the lender that you are going to use.
2. You may get an onslaught of marketing from other mortgage companies.
When you apply for a mortgage, your lender will perform a hard credit pull when reviewing your application. If you don’t undergo the opt out process, your information will be shared with each of the three main credit agencies (Equifax, TransUnion, and Experian). Under the Fair Credit Reporting Act (FCRA), these companies are permitted to include your name on lists that can then be bought by other creditors or insurers. The groups buying these lists are the ones you will start to see come through your inbox with “prescreened” offers of credit.
SOFT CREDIT PULL
A soft credit pull allows borrowers to prepare for purchasing a home without having to undergo a hard pull on their credit. Soft credit inquiries are usually used for background checks. These may occur when you are going through the hiring process or when a credit card company wants to offer you specific deals you may qualify for based on credit. Soft credit pulls have a few advantages:
1. Soft credit pulls have no impact on your credit score.
Soft credit inquiries aren’t tied to specific requests for new credit and therefore don’t impact your score. They may or may not show up on your credit report, depending on the bureau.
2. Learning about your credit score early can allow you more time to iron out credit issues.
If you have a lower credit score, certain loan options may not be available to you or you may have to pay a higher interest rate. Knowing your credit score early can allow you to take necessary steps to increase your score and secure a more favorable loan and rate.
3. Your information won’t be shared so you won’t get as many telemarketing calls or spam in your inbox.
This allows you to explore your options without being inundated by marketing from other companies, which can get overwhelming.
4. A soft credit pull is the same format and credit score as a hard pull.
Undergoing a soft credit pull means you and your potential mortgage lender will have the information needed to start the mortgage process. This means that your lender can provide a loan qualification letter and you can start shopping without having to wait.
If you want to learn more about credit inquiries and instances where soft credit pulls may be used over hard credit pulls, check out this article from CreditKarma. If you want to learn more about credit in general, visit our blog Nine Credit Score Myths! You can always contact us to get in touch with an experienced Loan Officer that can answer all of your credit and home buying related questions.
Why Choose FBC Mortgage
FBC Mortgage, LLC is a leader in helping home buyers with fast and simple loans. We’re dedicated to exceptional customer service and are always available when you need us most, even at night and on the weekend. We’ll help you navigate your new home purchase, and keep you updated along the way with weekly check ins, so you know you’re taken care of. That’s one of the many reasons why 95% of our clients would recommend us to their friends and family. It’s also why the nation’s top home builders and Realtors trust FBC to help their new home buyers.
Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At FBC Mortgage, LLC, we’re dedicated to helping home buyers finance their dream home.
All information presented is for educational purposes only and not intended as financial advice. FBC Mortgage, LLC is a national mortgage lender headquartered in Orlando, Florida. Specializing in residential mortgage lending, including purchase, refinance, construction, and renovation loans. See what our clients have to say. NMLS#152859 EHL ©2023.