For those of us shopping around for the best rates on a mortgage or other loan, a common question is: will comparing loans affect my credit score?
The short answer is: it depends. The long answer requires a more in-depth explanation.
First, it’s important to understand the difference between soft credit check and a hard credit check.
A soft credit check (sometimes called a soft inquiry or soft pull) is a preliminary way for a creditor to figure out where you stand financially. By listing your name, birthdate, income, and estimated credit score, you may get a general estimate of what to expect from a loan rate. Reviewing your own credit history is also categorized as a soft inquiry, which may be helpful to know when working on fixing your credit score. Importantly, a soft credit check does not impact your credit score.
A hard credit check (a hard inquiry or hard pull) will require your social security number, and possibly proof of income. Hard inquiries do affect your credit score, but are a better, more accurate way for a creditor to discern whether or not you qualify for a loan. Usually in a hard inquiry, a banker has accessed your credit score and credit history.
If you’re not sure which type of inquiry will be performed, it is usually safe to assume that any time your social security number is requested, a hard inquiry will be performed at some point in the immediate future. Before that, any rate estimate you receive is just that: an estimate. When you receive “pre-approved” offers in the mail from various lending institutions, that does not mean anyone has run a hard credit check. In fact, for the most part, it is illegal to run a hard credit inquiry without your express consent.
So, when shopping for the best rate on a loan, here are a few tips:
So, in the end, the answer to the original question, “will comparing loans affect my credit score?” is, predictably, “it depends.” The best thing you can do is stay informed, ask plenty of questions as you’re researching loans, and remain in control of your search for quality credit.
Carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us tweet on Twitter.
Should you hire a financial advisor? Here you can get all of your questions about…
While paying off collections generally won’t improve your credit score, newer scoring models like FICO…
If you’re wondering “how much will a secured credit card raise my score,” it won’t…
Learn what credit mix is and how it affects your credit score, as well as…
Discover the best finance podcasts to learn everything from how to create a budget to…
Do utility bills affect your credit score? Get the facts about how accounts like gas…