Soft Credit Inquiries vs Hard Credit Inquiries

Hey guys, welcome back to another week of Mortgage Matters in Minutes. I'm your host Brent Rasmussen, owner of Mortgage Specialists. So, the last few years we've gotten lots of questions about are you going to pull my credit? How long is it good for? What's a soft credit inquiry? What's a hard credit inquiry? Because there's lots of information out there of people saying don't get your pre-approval letter too early because it might expire over time. And that's the worst bit of advice that any mortgage professional can give you. And we see that each and every day. People waiting and delaying and then don't have a plan when they really need the loan that they want to buy the house with. So today we're going to talk about real quick and real simple the difference between soft credit inquiries and hard credit inquiries. I would say in the mortgage world, soft credit inquiries generally were never really used unless you would receive something in the mail that said, "Hey, you're preapproved for a refinance." That's about the only time that has happened. But I can share with you with the costs of full hard credit inquiries and full credit reports, the cost has gone up so significantly, many mortgage lenders now are using soft credit inquiries to do a mortgage pre-approval. So, first of all, let's talk about what a soft credit inquiry is. Soft credit inquiry is access to our information, but it will not affect your credit score as a credit hit by obtaining your full hard credit inquiry. So, if you can get a lender to pre-approve you preapprove you based upon a soft credit inquiry, that is a great thing because it will not cause a ding to your credit. But we've spoken about this and spoken about this before is that even if you do obtain your credit report, it's only going to affect your score a couple points if you have perfect credit. If you have bad credit, a hard inquiry could cause more damage to the score than if you have very good credit. So again, back to the soft inquiries, we are using those at mortgage specialists very actively to get individuals preapproved because what I found here locally in the Omaha metropolitan area, people that have great credit always have great credit. They don't do anything in the meantime between preapproval and closing to mess it up. If that happens, that can happen on anybody's loan or any situation that could happen. And if a late payment shows up throughout the process, that could cause anything to be denied or not move forward. We can't control any of that. So, soft credit inquiries are a good thing. And don't get stuck by saying, "I want to wait till I get closer to finding a house before getting my credit checked." We here at Mortgage Specialists extend pre-approvals for years and have never had a problem with them closing because we know what it is that's taken and needed into the calculations and into the loan. So, now let's talk quick about a hard inquiry. Hard inquiries have to be done in order to get your loan approved. But if you're doing a pre-approval, you might not need a loan for 3, 6, 12 months down the road. And we tell all of our clients to call us a year before you're ready to buy. So we can look at is there anything on your credit that we would advise you to change to get a higher score, to get a better interest rate. And we also look at numbers to say, is this what you expect for a payment? Is this what you want to be planning for for cash to close? Planning in advance of over even a year is not too early because it's a big purchase. It's a big decision. It's a lot of money that you want to make sure that you have readily available to get into that home. So, anytime you need to finalize a mortgage, a car loan, a credit card, a student loan, yes, they're going to pull a hard credit inquiry and that will possibly ding your credit score a couple points, but a couple points is not detrimental. When you have a perfect credit score, two to 10 points is not a problem at all in regards to getting the best interest rate. still so many people want to kind of follow and think that they know by saying I don't want my credit pulled it's going to somehow get them a better deal and I rarely if ever see it causing any issue with a different credit score of getting a higher rate or not qualifying so on and so forth. Lastly, when you're shopping for a mortgage, obviously when you pull credit reports, we have that de-duping period. We've done a whole video about the time frame of you getting multiple hard inquiries from the same or different mortgage companies over the same time frame, same window. Usually, it's anywhere from 14 to 45 days, mostly 30 days, is that time frame. You can get as many inquiries, hard or soft, as you want, and it still counts as one inquiry. They understand people in life move, have to get utilities turned on, have to get communications turned on, and that's just a timing aspect, not that you applied somewhere and become denied for a loan in that regards. So, if your lender or if your lender doesn't do soft inquiries, contact us. We'll do a pre-approval for you guys. but getting that soft inquiry gives us access to what your credit score is, what your debt is, and it's all the same accuracy as a hard credit report is, but it's just much cheaper, and it doesn't look at any issues in regards to dinging your credit by having it obtained. So, if you have any additional questions, please let me know. We are seeing it very often. People are hesitant to get preapproved, and really, they should not be because of bad information out there. And that's why we're here each and every week trying to give accurate financial and mortgage information so people can make a plan that's best for them. I'm Brent Rasmussen, owner of Mortgage Specialists. Look forward to seeing you here each and every week to give you any education that you may need in regards to getting preapproved, buying a home, and financing it. We'll see you here next time on Mortgage Matters in Minutes. Mortgage specialists driven. Trusted reliable.