Does Getting Pre-Approved Hurt Your Credit Score?

Say you have been putting off getting pre-approved for a few months because you read somewhere that it would cost you points on your credit score. When you finally let a lender look, the review turns out to be a soft pull, your score does not move at all, and the one thing that shows up on the report takes three weeks to clear. You have those three weeks because you started early. That is the whole story of this question, and it plays out the same way for a lot of clients.

Getting pre-approved does not have to touch your credit score at all, because a soft credit pull is enough to review your file and write a letter. When a hard pull does come later, it usually costs fewer than five points.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, NMLS #483943, through C2 Financial Corporation.

The 45-day rate-shopping window you have probably read about may not be the window that applies to the scores mortgage lenders pull. Older FICO versions use a 14-day window, and those are the versions Fannie Mae requires mortgage lenders to pull. If you spread your lender shopping across six weeks on the strength of the 45-day advice, you can take more than one hit. The rest of this page explains why, and what to do instead.

Soft pull versus hard pull

These are two different things, and the difference is why a pre-approval does not have to cost you anything.

A soft pull is a review of your credit that only you can see. It does not show up to other lenders and it has no effect on your score. It is the same kind of event as checking your own credit, or the pre-screened offers that arrive in the mail.

A hard pull is an inquiry recorded because you applied for credit. Other lenders can see it, and it is a scoring factor, a small one.

That distinction is the useful part. A soft pull is enough for me to see your actual credit report, with the balances, the accounts and the score that are on it. From that I can calculate your debt ratio from what is on the report rather than from what you remember, and write you a letter backed by evidence. No hard inquiry is needed for that.

The hard pull comes later, when your file goes to a lender for an actual loan. By then you are not shopping any more, and you already have a letter that told you where you stood before you spent a weekend at open houses.

The points a hard credit pull costs

The number is smaller than the worry around it.

FICO's own page on credit inquiries says that for most people, one additional inquiry takes less than five points off their FICO score. It affects clients with short credit histories or very few accounts more than everyone else, which matters if you are young or new to credit, but "less than five points" is the baseline for most clients.

Five points on a score is a small cost next to what a quarter-point difference in rate adds up to over the years you keep a loan. How much the rate changes your payment shows that arithmetic on a sample loan.

The rate-shopping window, and why 14 days is the safe number

Scoring models know that clients shop for mortgages, so multiple mortgage inquiries inside a defined window get treated as one event rather than several.

The length of the window depends on which version of the scoring formula is being used, and FICO states both lengths on the same page:

• Newer FICO versions use a 45-day window. This is the number almost every article quotes.
• Older FICO versions use a 14-day window. Fannie Mae requires lenders to pull the classic FICO versions on the loans it buys, not the newest ones, so for a mortgage the protective window is 14 days.

FICO's page says the lender chooses which version of the formula is used. You will generally not be told which one that is, and you have no way to check. That makes the safe practice simple: you do all of your hard pulls inside the same two weeks, and ideally inside the same few days. It is the only version of the advice that is correct under every scoring model, and it costs you nothing to follow.

There is a second protection. FICO ignores mortgage, auto and student loan inquiries made in the 30 days before a score is calculated. So an inquiry from last week may not be counted at all when a score is pulled today.

Why your mortgage credit score is different from the score in your app

The score in your banking app, on your credit card's dashboard, or from a free monitoring service is often a different FICO version or a VantageScore. The score a mortgage lender pulls is one of the classic FICO versions Fannie Mae requires.

They can be built from the same credit report and still disagree, sometimes by a meaningful margin in either direction. Neither one is wrong, because they are different models that answer slightly different questions.

In practice, the number you have been watching tells you which direction your credit is moving, and it is a poor predictor of the exact figure a mortgage file will use. That is one more reason to have somebody pull the mortgage score early, with a soft pull, while nothing is riding on it.

The letter, and how long it lasts

Once your credit has been reviewed and your income and assets have been looked at, you get a letter, and two things about it matter.

It is dated, and it has a shelf life. My letters run 90 days, which is a comfortable margin inside the age limits underwriting applies to credit documents. Fannie Mae's rule on the age of credit documents is that they must be no more than four months old on the day you sign the loan. When a letter expires, it gets reissued rather than rebuilt, as long as nothing material has changed.

"Material" means four things: income, credit, assets and employment. If none of those moved, a reissue is routine paperwork rather than starting over.

So getting a letter does not commit you to buying anything, and it does not start a clock you have to beat.

Two good reasons to get the letter, and only one involves a home

You are ready now. You get a documented letter, you know your range, and you can write an offer the same week. A listing agent who gets two offers will usually call each lender to find out how much review is behind the letter, and a letter backed by a reviewed file holds up to that call.

You are not ready, and this is still worth doing. Maybe the timing is a year out, maybe you are waiting on a lease, maybe you just want to know. The letter goes in a drawer, and what you keep is the information: the range the reviewed file supports, and whatever needs attention before it matters.

An early soft pull gives you time, and time is what makes a problem in a mortgage file cheap to fix. A collection account nobody knew about, a co-signed loan counting against your ratio, income that documents differently than it feels: each of those is a small chore in January and a bigger problem in closing week. Where to start when buying a home walks through the order I like to do this in.

Common mistakes

Waiting until you find the home. The hardest time to learn your range is after you have emotionally moved in. Everything on this page is easier before there is a property attached to it.

Spreading pulls over a month because an article said 45 days. Fourteen days is the safe window, for the reasons above.

Assuming a low score is disqualifying. Programs differ a great deal in what they ask, and FHA and conventional price the same file differently. A score changes the options and the pricing, and understanding how it changes them is worth more than guessing.

Assuming nothing can be improved. Balances relative to limits move a score faster than almost anything else. What actually moves a score, and how long each thing takes, is knowable.

Not asking what the letter is based on. A letter issued without a credit report and documents is really a prequalification, even when it is called a pre-approval. You can ask the lender whether the letter was written from a credit report and documents or from a conversation, and the answer tells you which one you are holding.

An illustration

Numbers below are made up to show the mechanism.

Two clients start looking in the same week.

The first is worried about her credit and puts it off. In March she finds a home, applies in a hurry, and the report shows a medical collection she had never seen. It can be resolved, but it takes three weeks she does not have, and the ratio question nobody asked about in advance turns out to matter.

The second does a soft pull in January. Same collection, found in a week when nothing is riding on it. He deals with it, gets a letter, and does nothing else for four months. In May he writes an offer with a letter behind him, and when the listing agent calls to ask about it, there is a reviewed file to talk about.

The two files were almost the same, and the only difference between them was when the information arrived.

Your next step

You can run your numbers first with no credit pull, no account, and nobody calling you. That gives you rates for your scenario, your debt ratio and closing costs before anybody looks at anything.

Once you want the letter behind you, here is what a verified pre-approval reviews, and what the letter is worth once you have it.

You can choose whichever of these fits once you are ready for the next step. You can hit Apply to start your pre-approval, call me at (843) 765-0000, or email me at jeff@solverya.com. If I sent you a personal page, the schedule button at the top of it lets you pick a time. I won't call you unless you decide you want to talk.

Nothing here is a credit decision, an approval, or a denial, and no pre-approval from anyone is a loan commitment. Final approval always depends on the property, the appraisal and underwriting of the complete file. Scoring models are revised over time; what applies to a specific file is worth confirming rather than assuming.

Common questions

Does a soft credit pull affect my credit score?

No. A soft pull is visible only to you, is not shown to other lenders, and is not a scoring factor at all. It is the same category of event as checking your own credit or receiving a pre-screened offer. That is why a soft pull is enough to review a file and produce a documented letter without an inquiry appearing on your report.

How many points does a mortgage credit pull cost?

FICO's guidance is that one additional inquiry takes less than five points off the score for most people, with a larger effect for those who have few accounts or a short credit history. The effect also fades over time. Set against the cost of not comparing options on a loan held for years, a single inquiry is rarely the expensive part of the decision.

How long do I have to shop for a mortgage without extra credit damage?

Fourteen days is the safe answer, and it is shorter than the number most articles give. Multiple mortgage inquiries inside a shopping window are counted as one event, but the window depends on the scoring version. FICO says the newest versions use 45 days and older versions use 14, and Fannie Mae requires mortgage lenders to pull the classic FICO versions rather than the newest ones. Since a client cannot tell which model a lender uses, keeping all hard pulls inside the same two weeks is the only advice that is correct in every case.

Why is my mortgage credit score different from the score in my banking app?

Because they are often different scoring models built from the same report. Consumer apps and monitoring services often show a different FICO version or a VantageScore, while mortgage lenders pull the classic FICO versions Fannie Mae requires. Different models can disagree, in either direction. The app score tells you which way your credit is moving, and it is a poor predictor of the exact figure a mortgage file will use.

How long is a pre-approval letter good for?

Mine are dated and run 90 days, which is comfortably inside the four-month age limit Fannie Mae applies to credit documents on the day you sign the loan. When a letter expires, it gets reissued rather than rebuilt, as long as income, credit, assets and employment have not materially changed. That is why getting one early costs nothing even if the timing turns out to be a year away.

Can I get a pre-approval letter if I am not ready to buy yet?

Yes, and it is often the better time to do it. The letter goes in a drawer, and what you keep is the information: your actual range and anything that needs attention before it matters. A problem found while nothing is riding on it is a chore, and the same problem found during closing week is expensive, because some of them take longer to fix than a contract allows.