Navigating the loan application process can be complex, especially when it comes to understanding how credit checks work. At AZ Mortgage, we want to help demystify these terms so you can approach your mortgage application with confidence. Two key types of credit checks are “soft pulls” and “hard pulls.” Understanding the differences between them can impact your credit score and your homebuying experience.
What is a Soft Pull?
A soft pull, or soft inquiry, is a type of credit check that does not affect your credit score. It’s used for preliminary evaluations and can occur in several situations, including:
- Pre-Qualifying for a Loan: Before you formally apply for a mortgage, lenders may perform a soft pull to gauge your creditworthiness and provide an estimate of the loan terms you might qualify for.
- Personal Credit Checks: When you check your own credit report or use a credit monitoring service, a soft pull is performed.
- Pre-Approval Offers: Credit card companies or lenders might use a soft pull to pre-approve you for offers or promotions.
Benefits of a Soft Pull:
- No Impact on Your Credit Score: A soft pull doesn’t affect your credit score, so you can check your credit profile or get pre-qualified without worrying about potential negative effects.
- Initial Assessment: It provides lenders with a preliminary view of your credit health, helping you understand your financial standing before making a formal application.
What is a Hard Pull?
A hard pull, or hard inquiry, occurs when a lender reviews your credit report as part of a formal loan application. This type of credit check is typically required when you apply for:
- A Mortgage: When you submit a formal mortgage application, a hard pull is conducted to evaluate your creditworthiness and determine the specific terms of your loan.
- Auto Loans: Applying for a car loan also involves a hard pull to assess your credit risk.
- Credit Cards: When you apply for a new credit card, a hard pull is used to evaluate your credit profile.
Impact of a Hard Pull:
- Can Affect Your Credit Score: A hard pull may cause a temporary dip in your credit score. This is because the inquiry signifies that you are seeking new credit, which can be seen as a higher risk by lenders.
- Used for Final Decisions: Hard pulls are used to make final lending decisions and affect the terms and rates of your loan based on your complete credit profile.
Soft Pull vs. Hard Pull: Key Differences
- Effect on Credit Score: Soft pulls do not impact your credit score, while hard pulls can cause a temporary decrease.
- Purpose: Soft pulls are used for initial assessments and pre-qualifications, while hard pulls are necessary for final loan approvals and detailed evaluations.
- Frequency: Soft pulls can be done frequently without harm, but hard pulls should be limited to avoid excessive impacts on your credit score.
How to Manage Both Types of Pulls
- Use Soft Pulls Wisely: Take advantage of soft pulls to gauge your credit health and explore mortgage options without affecting your credit score. This can help you make informed decisions about your home financing.
- Prepare for Hard Pulls: When you’re ready to apply for a mortgage, ensure your credit report is accurate and in good shape. Minimize hard pulls by limiting the number of loan applications you submit within a short period.
- Monitor Your Credit: Regularly check your credit report to stay informed about your credit health and address any issues that may arise.
Partner with AZ Mortgage
At AZ Mortgage, we’re here to guide you through the mortgage application process with clarity and confidence. Understanding the role of soft and hard pulls is just one aspect of securing the right home loan for you. Our team is dedicated to providing you with the information and support you need to make informed decisions.
Ready to Get Started?
If you have questions about soft pulls, hard pulls, or any other aspect of the mortgage process, contact AZ Mortgage today. Feel free to call us at 623-233-4335 to schedule a consultation. Let us help you navigate the path to homeownership with ease and expertise.
Understanding the nuances of credit checks can help you manage your credit profile effectively and achieve your homebuying goals. With AZ Mortgage by your side, you’re one step closer.
