Will There Be a Hard Credit Check? What Homebuyers Need to Know

When you’re in the process of buying a home, understanding when a lender will perform a “hard” credit check is crucial. A hard credit check can affect your credit score, which is why it’s important to know how and when these checks occur, especially if you’re shopping around for the best mortgage rate.

What is a Hard Credit Check?

A hard credit check, also known as a hard inquiry, occurs when a lender reviews your credit report as part of their decision-making process. This type of inquiry is more thorough than a soft inquiry (often used for pre-approvals or background checks) and can temporarily lower your credit score by a few points. While the impact is usually minor, it’s still essential to be informed.

Why Lenders Perform Hard Credit Checks

Lenders perform hard credit checks to assess your ability to repay the loan. By reviewing your credit report, they can see your credit history, current debts, and payment behavior. This information helps them determine the risk of lending to you and set appropriate loan terms.

When Do Hard Credit Checks Happen?

Hard credit checks typically occur at two critical stages during the mortgage process:

1. Final Loan Approval: Another hard credit check usually happens when you formally apply for the mortgage after making an offer on a home. This ensures that your financial situation hasn’t changed since the pre-approval stage.
2. Mortgage Pre-Approval: In most cases, Element Home Loans is able to pre-approve your loan with a soft credit pull. However, in some circumstances, lenders will need perform a hard inquiry to assess your creditworthiness. Pre-approval gives you a clearer picture of how much you can borrow and at what interest rate.

How Hard Inquiries Affect Your Credit Score

A hard inquiry can affect your credit score, though the impact is generally minimal. Here’s what you need to know:

• Score Drop: A single hard inquiry can lower your credit score by a few points. The exact impact depends on your credit history.
• Temporary Effect: The effect of a hard inquiry is typically short-lived. Most credit scoring models, such as FICO, consider hard inquiries from the past 12 months, and they usually fall off your report after two years.
• Multiple Inquiries: If you’re shopping for a mortgage, multiple hard inquiries within a short period (typically 14 to 45 days, depending on the scoring model) are often treated as a single inquiry. This allows you to shop for the best rates without significantly penalizing your credit score.

How to Minimize the Impact of Hard Inquiries

While getting pre-approved and applying for mortgages is essential, there are ways to minimize the impact on your credit score:

1. Shop Within a Short Time Frame: Complete all your mortgage rate shopping within a short period to limit the number of hard inquiries.
2. Check Your Credit Report First: Before applying for pre-approval, review your credit report. This allows you to correct any errors and understand what lenders will see.
3. Maintain Good Credit Habits: Keep your credit utilization low, pay your bills on time, and avoid opening new credit accounts before and during the mortgage process.

Connect with Kevin Blair for Expert Mortgage Guidance

As you navigate the home-buying process, having a trusted mortgage expert by your side is invaluable. Kevin Blair, the top Loan Officer in Chattanooga, TN, is here to help you every step of the way. Whether you have questions about hard credit checks, mortgage rates, or anything else related to home loans, Kevin’s team is ready to provide the guidance you need.

• Phone: 423-488-7571
• Email: kevinblair@elementhl.com
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Licensed in Tennessee, Georgia, Florida, Pennsylvania, Kentucky, Texas, and Alabama, Kevin Blair and the Element Home Loans team are your go-to resource for all things mortgage-related in the Chattanooga area and beyond.

Don’t hesitate to reach out to Kevin Blair for expert advice and personalized service that ensures you get the best mortgage for your needs.