Published: January 11, 2013 • Last updated: January 7, 2021 at 0:51 am
If I ask for a pre-approval, will it reduce my credit score?
Dear Ross, we are looking around for our first home, and we want to know how much mortgage we will qualify for. If we ask for a pre-approval, will you have to check our credit history? Is that a ‘hard inquiry’, and will it reduce our score?
Yes, if we do a formal request for a pre-approval, with your permission, we would access your credit reports, and submit these with the application. It is a ‘hard inquiry’, so it may have a really minor effect on your score, which is one reason why you should be niggardly when it comes to applying for credit and allowing people to check your credit history.
Keep in mind, if you make an offer to buy a home fairly soon after, we can use the same credit report twice, so no harm no foul. Credit reports have a shelf life of 30 days with our mortgage lenders.
Another useful fact is that if you are doing a little shopping around, and your credit is checked more than once within a 45 day period, Equifax Canada tells us the impact of these collective inquiries is as if it only happened once!
Mortgage pre-approvals are not binding!
But please understand that no mortgage pre-approval is binding on the lender. It is not an absolute guarantee. Lending guidelines can suddenly change, and so can your personal circumstances.
Most of the time, I am able to assess the strength of an application and advise you whether or not you would qualify for a mortgage without having to submit a pre-approval request. And if I’m not sure, I’ll tell you and we can submit in advance to a lender.