What do bread, mattresses and credit checks have in common?
What you don’t know can hurt you when it comes to credit. That’s why we’re here to tell you about the two different types of credit checks: hard and soft.
What is a credit check and when does it happen?
A credit check (aka credit pull or credit inquiry) is the process by which a lender, broker, or another third party looks at your credit report to evaluate your creditworthiness. Basically, when lenders need to verify your potential to pay back any money they might lend you, they’ll want to perform a credit check. A simple enough concept, sure, but it’s worth noting that not all credit checks are created equal.
What is a hard pull?
A hard pull occurs when you apply for credit — as in: you’ve successfully been pre-qualified and now you’ve chosen to proceed with a credit application.
The thing about hard pulls is that they actually affect your creditworthiness to a small degree. Hard pulls are noted on your credit report and remain there for two years, and can even temporarily lower your score by a few points. So, you must be discerning about when and to whom you give this permission. You sure don’t want to go around applying for credit willy nilly (and possibly being denied). That’s not a good look for anyone, and future lenders will see that.
Thankfully, these require your authorization and won’t be frequently required. However, securing a mortgage is one of the instances when a lender will need to perform a hard check. Other times you’d need these: auto loan, personal loan, student loan, credit card and apartment applications. Keep in mind: you’ll want to avoid applying for any new credit while you’re thinking of, or are in the process of, securing a mortgage.
The good news is that lenders won’t need to perform this type of credit check until your relationship with your mortgage is pretty advanced — as in, you’ve picked a house, picked a lender, and picked a mortgage. Let’s move on to greener pastures.
What is a soft pull?
If a hard pull is an unsliced crusty baguette, a soft pull is a warm, buttery dinner roll. It’s all fun and no stress! Soft pulls don’t affect your credit score at all. In fact, soft pulls could even be happening at this very moment without your knowledge. That’s why you get promotional rates and credit card offers in the mail. It’s cool, and nothing to worry about.
When you begin the process at Simplist, we perform a soft credit check (with your permission). This allows you to be pre-approved by a lender while you’re shopping for your new home. And, amazingly, this doesn’t affect your credit score. Yay!
So, you can feel free to dip your toe in the mortgage pool with Simplist’s pre-approval process. You have nothing to lose and potentially, a home loan to gain! See? It’s fun!
Bottom line:
Apply for credit sparingly to avoid accruing too many hard pulls on your credit report. And, if you just can’t wait to start shopping for a mortgage, take care to do so with a company that offers soft credit checks and subsequently minimizes the impact on your credit score. Check the fine print!
Stay on top of your credit report by checking it often and disputing any hard inquiries you didn’t authorize.
Don’t apply for new lines of credit while you’re waiting to secure a mortgage.
And get pre-approved with Simplist today for a worry-free, easy-breezy start to your home loan journey!