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Redfin Real Estate Forums :
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Re: Does preapproval affect credit score
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Does preapproval affect credit score
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manswa
Newbie
Posts: 1
Registered: 06-01-2008
Message 1 of 6
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Does getting a preapproval cause a hard credit pull and affect the credit score? By how many points? For how long is a preapproval valid?
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06-01-2008 07:39 PM
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Re: Does preapproval affect credit score
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Cav
Redfin Staff
Posts: 50
Registered: 07-03-2007
Message 3 of 6
Viewed 4,264 times
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Hi Manswa-
Yes, a pre-approval entails a hard credit pull and can have an effect on your score (up to 5 points according to some credit-inquiry sites, although an exact figure is impossible to confirm).
If you know your credit score you should be able to at least get that day’s pricing or even a GFE without having your credit pulled (if a broker tells you otherwise it may be worthwhile to keep shopping). A pre-approval is best to obtain when you are actually going to make an offer on a property and want to look as viable and serious of a candidate as possible to the seller. Pre-approval validity varies from lender to lender, but 45 days is common timeframe.
FYI, the myFICO.com web site explains rate shopping in depth: Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you're only looking for one loan. To compensate for this, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for auto or mortgage inquiries older than 30 days. If it finds some, it counts all those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14-day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45-day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.
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06-02-2008 09:57 AM
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Re: Does preapproval affect credit score
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Yuri
Newbie
Posts: 8
Registered: 12-17-2008
Message 5 of 6
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Manswa, A hard credit pull for a mortgage or (TriMerge as we say) can have an effect on your scores. But what's important to know is why lenders pull credit reports in the first place. The real answer is because they are not just looking for a score, they are looking for debt obligations. Most mortgage originators fail to get a complete application in the first place figuring they will be saving the customer time by pulling a trimerge report and having all of the data on the report imported into the mortgage software program. Up to mid 2008 the FHA insured mortgage didn't have a score floor and even today there still lenders that will underwrite FHA loans where the score is not a factor. If you need to know if your qualified for a mortgage you only need to know your debt obligations. Also, generally (speaking for mortgages only) the first time the credit report is pulled is the one that has the effect on your scores usually to the tune of 2-5 points. We understand that only 2 additional inquires (for mortgages only) will have no additional effect within the 30 day period. There are some super simple ways to get pre-approvals and not have mortgage originators pull your credit reports at all. The truth about pre approvals is that they don't really mean a whole lot. The are supposed to confirm that someone has seen your profile as well as your credit report and hopefully have done the math to qualify you for the mortgage. I hate the term "Pre-Approved" I'm still not sure where it came from. Probably from realtors if I had to guess driven by sellers or listing agents wanting to make sure would be buyers are not wasting the sellers time, but if you ask a realtor they will say a pre-approval isn't worth the paper it's typed on and there are many reasons why. That fact is your either qualified or your not. Did you know you can qualify yourself? These so called pre approvals typically last 30 days. However, they really last as long as your circumstances stay the same. Hope this helps.
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12-18-2008 03:19 AM
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Re: Does preapproval affect credit score
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Yuri
Newbie
Posts: 8
Registered: 12-17-2008
Message 6 of 6
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Just a thought, The info from MyFico.com is interesting. I find many instances where the information from my fico.com will differ from other sites. They will also differ between the repositories themselves. It's almost as if they really don't want anyone to have too clear an understanding of the credit model and the algorithms that generate scores. In my ten years of dealing with credit I have yet see all experts agree on everything relating to credit. But know one knows how Google's algorithms work either. So it's probably by design. However, lenders only choose which company they will use to access the repositories. They make these choices consistent with how they evaluate risk and the data supplied by the provider. hope this helps someone.
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12-18-2008 03:39 AM
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