Applying for a mortgage means getting familiar with credit checks. Whether you’re purchasing a home or refinancing an existing property, a lender needs to assess your financial history before approving a loan.
But when does a mortgage lender pull credit, and how does it affect your ability to secure a mortgage? Understanding when and why lenders check credit can help you prepare, minimize any impact on your score, and ensure a smoother loan process.
When Does a Mortgage Lender Pull Credit
A mortgage lender pulls credit at multiple points during the loan application process. The number of times depends on the length of the transaction, any discrepancies in the report, and whether there have been changes to your financial situation. Here’s when you can expect a credit check:
1. Pre-Approval Stage
The first credit check happens during pre-approval. When you apply, a lender reviews your credit report to determine whether you qualify for a loan. This is a hard inquiry, which means it will slightly impact your credit score.
A strong credit score can help you secure better loan terms, so reviewing your report before applying is a good idea. You can check your own credit without affecting your score, which allows you to correct any errors in advance.
2. Loan Processing
Once you’ve found a home and submitted a formal loan application, a lender may need to pull your credit again. Credit reports are valid for 120 days, so if your loan takes longer to close, the lender will need an updated report.
Additionally, if there are inconsistencies between your application and credit history—such as a name change, incorrect address, or new debt—a lender may conduct another inquiry to verify the details.
3. Pre-Closing Credit Check
Before finalizing the loan, a lender may pull a final credit report to ensure you haven’t taken on new debt. This check helps confirm that your financial situation remains stable. If new accounts appear, the lender must reassess your debt-to-income ratio, which could impact your loan approval.
Does a Mortgage Credit Check Hurt Your Score?
Many borrowers worry about the effect of multiple credit checks. While hard inquiries can lower a credit score, mortgage-related inquiries are treated differently.
When multiple mortgage lenders pull credit within a 45-day window, it counts as a single inquiry. This allows you to shop around for the best loan terms without repeatedly damaging your credit score.
However, if you apply for other types of loans—such as car loans or credit cards—outside of this window, additional inquiries could lower your score. That’s why it’s best to avoid new credit applications while in the middle of securing a mortgage. Learn more about how credit scores impact mortgage rates.
Soft vs. Hard Credit Inquiries
Lenders use two types of credit inquiries, but only one affects your score:
- Soft Inquiry: This check is used for pre-qualification and does not impact your credit score. Soft inquiries provide a general overview of your credit but lack detailed financial history.
- Hard Inquiry: This check happens when you officially apply for a mortgage. Hard inquiries provide full credit details and temporarily lower your score.
A mortgage broker may perform a soft inquiry before submitting your loan application, allowing you to get an idea of your qualification without affecting your credit score.
How to Minimize the Impact of Credit Checks
Since credit inquiries are unavoidable when applying for a mortgage, the goal is to limit their effect. Here’s how:
- Shop for a mortgage within 45 days: All mortgage-related credit checks within this window count as one inquiry.
- Avoid new credit applications: Hold off on applying for new credit cards, car loans, or personal loans while your mortgage is being processed.
- Check your credit report in advance: Reviewing your report early can help you identify and correct errors before applying for a loan. You can request a free credit report from annualcreditreport.com.
- Keep debt levels low: Avoid maxing out credit cards or taking on additional financial commitments that could alter your creditworthiness.
Taking these steps can help protect your credit score and ensure a smoother mortgage approval process, keeping you in the best position to secure favorable loan terms.
Can a Lender Deny a Loan Based on Credit Pulls?
A mortgage lender won’t deny a loan based solely on the number of credit pulls. However, if your credit report shows a pattern of excessive borrowing or if new debt increases your debt-to-income ratio, it could impact your approval.
If you’re concerned about how credit checks might affect your mortgage application, speaking with a loan officer can help. Knowing what questions to ask a mortgage lender can also provide clarity.
What Happens If My Credit Score Changes Before Closing?
Since lenders check credit before closing, any changes to your financial situation can impact your mortgage. If your score drops due to new debt, missed payments, or other financial activity, it could:
- Increase your interest rate
- Require additional underwriting approval
- Cause a loan denial in extreme cases
To avoid issues, maintain stable finances throughout the mortgage process. Keep credit card balances low, pay bills on time, and avoid taking on new debt.
When to Talk to a Mortgage Lender
Many borrowers wonder when to talk to a mortgage lender in the home-buying process. The best time is before you start house hunting. A lender can review your financial situation, pre-approve you for a loan, and help you understand how credit factors into the approval process.
Getting pre-approved early gives you a competitive edge in the market and ensures you’re looking at homes within your budget.
Get in Touch with Penn Street Today
So, when does a mortgage lender pull credit? At least once during pre-approval, potentially again during processing, and possibly right before closing. While these inquiries can slightly impact your score, shopping within a 45-day window helps minimize the effect.
If you’re wondering “when does a mortgage lender pull credit again?” after pre-approval, it depends on how long the loan process takes and whether any financial changes occur.
Being mindful of your credit activity from application to closing ensures a smoother transaction. Keeping your financial situation stable and working with an experienced mortgage broker can make the process easier.
If you have questions about credit checks, mortgage approval, or loan options, Penn Street Mortgage is here to help. For more information on loan options, including lender credits, reach out to our team today.