Credit Inquiries and You: How Your Lender’s Credit Inquiries Affect Your Finances 

Do you know when mortgage lenders request to review your credit report, that the request is recorded on your credit report as a “hard” inquiry and that hard inquiries usually will impact your credit score? 

Inquiring about your credit score is a regular part of the loan application process. 

What's in this article?

Whats a soft credit inquiry?
What is a hard credit inquiry and why do they matter to lenders?
Why a soft credit inquiry is important to borrowers
Compass Mortgage is happy to help borrowers with soft inquiries

At Compass Mortgage, we understand how the whole home buying process—especially getting a mortgage—can be a stressful experience. This is why Compass now recommends “soft” credit inquiries, but how do they benefit you? 

We’ll explain what a soft credit inquiry is, why we advocate soft inquiries and how they can be advantageous for you—the borrower. 

Read on as we explore the benefits in more detail and explain how Compass’ new soft credit inquiry can help make the borrowing process more accessible and transparent.

Whats a soft credit inquiry?

A soft credit inquiry, also known as a soft pull or soft credit check, is a type of credit check that doesn’t affect a borrower’s credit score. 

Soft credit inquiries provide lenders with a snapshot of a borrower’s credit history without impacting their credit score. 

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What is a hard credit inquiry and why do they matter to lenders?

The mortgage pre-approval stage of the loan process gives you an idea of how much you can afford so you can shop for homes within your budget. 

Prospective homebuyers must provide their social security number in order to be pre-approved. Your lender will use your SSN to run a credit check as well as verify your income and employment information. This is called a hard credit inquiry

Lenders use this process to determine your credit history, how frequently you pay your debts and invoices on time and whether your credit reports contain any negative information. 

They also want to know how many lines of credit you have open and how long you’ve been using credit responsibly. These elements help creditors determine whether to grant you new or more credit, or in our case, a mortgage loan. 

Hard credit inquiries can affect your score

These “hard” inquiries can negatively impact a borrower’s credit score, especially if they occur frequently. 

The number of credit accounts you have is only a fraction of your credit score

A single hard inquiry is unlikely to affect your credit score significantly—for example, if you were applying for only a credit card or loan—but multiple inquiries from different lenders can sometimes shave up to five points from your credit. 

Other effects of a hard inquiry include: 

  • Credit checks remain on your credit record for two years, even though they only affect your credit score for 12 months.
  • Someone with a short credit history and few accounts may be substantially more affected by credit checks than someone with a long history and various credit experiences.
  • Many hard credit checks in a short period demonstrate an increased credit risk to a lender checking your credit report since it may appear that you are attempting to rapidly obtain a lot of credit.
  • If your credit score declines, you may pay more in interest over the course of a loan because of increased interest rates.

Soft credit inquiries, on the other hand, do not impact a borrower’s credit score. This means borrowers can shop for loans and compare offers without worrying about damaging their credit. 

Why a soft credit inquiry is important to borrowers

Unlike hard credit checks which can have a negative impact on your credit score, soft credit checks do not affect your credit score. This means you can check your credit report or allow a lender to pre-qualify you for a loan without worrying about the potential negative impact on your credit.

Additionally, by checking your own credit report regularly with a soft credit check, you can ensure that all the information is accurate and up-to-date. If you identify any errors, you can take steps to correct them before they cause problems.

When you keep track of your credit accounts and balances and any changes to your credit score, you can manage your credit more effectively and make informed decisions about borrowing and spending.

Regularly monitoring your credit report with soft credit checks can also help you detect any unauthorized activity on your credit accounts. You can then take action to prevent identity theft and minimize any damage that may occur.

Compass Mortgage is happy to help borrowers with soft inquiries

At Compass Mortgage, we’re now pleased to be able to pre-approve borrowers without hurting their scores by using soft credit checks. Borrowers can shop for loans and compare offers without worrying about damaging their credit scores with multiple hard inquiries.

Compass Mortgage is committed to putting our borrowers’ financial well-being first. 

We understand the importance of transparency and making informed financial decisions, and soft credit inquiries help us achieve this goal.

We’re committed to providing our customers with the best possible lending experience and look forward to helping you achieve your financial goals. This is also why we provide the Get Committed® program, a fully underwritten loan commitment that locks in your interest rate. This loan commitment has the power of a cash offer because you’re fully approved financially.

Get Committed® with Compass Mortgage today for a better mortgage experience.

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