Does a Pre-qualification Affect Your Credit?

Your credit score plays a major role in a lender's decision of whether or not to issue you credit, so keeping your score as high as possible is important. Pre-qualifying for credit generally does not affect your credit score unless the lender pulls your credit report at your request. If you are concerned about your score, try to pre-qualify without a credit check.

Credit Inquiry Basics

If a pre-qualification does affect your credit, it is through generating a credit inquiry. Every time a lender views your credit report, the lender's name appears in the section of your credit report that lists inquiries. This section is further divided into hard inquiries and soft inquiries. Hard inquiries are those you initiate by applying for credit, and these hurt your credit score, usually by five points or less per inquiry. Soft inquiries are not related to credit or were not initiated by you, so they do not affect your score at all.

Mortgage Pre-qualification

Before shopping for a home, many potential buyers get pre-qualified by a lender, which is a process by which the lender helps determine how much money the buyer seems qualified to borrow. Most pre-qualifications do not include a credit check, but the lender will probably ask the borrower about his general credit habits to estimate the credit score. If the lender asks for your social security number, ask if he will run a credit check before you give it to him. Do not provide the number if you do not want a credit check. If you ask the lender to run a credit check during the pre-qualification, this will result in a hard inquiry that will slightly lower your credit score.

Mortgage Considerations

Lenders will need to check your credit score to give you an exact quote on an interest rate because the rate is mostly based on your history with managing credit. Therefore, if you want to get interest rate quotes during the pre-qualification process, prepare to allow hard inquiries on your credit. Thankfully, the credit scoring formula recognizes when you are applying for just one loan with multiple lenders and only penalizes you for one inquiry, provided they are all within a two-week time period. In addition, an inquiry does not begin affecting your score until 30 days later, so each lender should see the same credit score.

Pre-qualified Credit Offers

Another type of pre-qualification is for credit offers that you get in the mail. These are often for credit cards but sometimes are for personal loans or other types of borrowing. You do not need to worry about these pre-qualified, pre-screened or preapproved credit offers because you did not initiate them. Any credit inquiry that you did not initiate by applying for credit does not affect your score.