Do Lenders Pull Credit the Day of Closing?

Lenders evaluate an applicant’s financial reliability to assess the risk of extending credit. A borrower’s financial standing remains a continuous consideration from the initial application to the final stages of closing. This ongoing assessment helps ensure the loan terms remain appropriate and the borrower’s ability to repay has not been compromised.

Lender Credit Checks Near Closing

As a loan approaches its closing date, lenders frequently conduct a “credit refresh” or “soft pull” in the days or weeks prior. While a full “hard” credit inquiry is not typically performed on the exact day of closing, a soft pull serves as a final verification. This confirms no significant adverse changes have occurred to the borrower’s financial profile since their initial application.

Unlike a hard pull, a soft pull does not affect the credit score. These soft inquiries allow lenders to obtain an updated snapshot of a borrower’s credit activity without negative impact. This practice helps mitigate risk by ensuring the borrower still qualifies under the agreed-upon terms.

What Lenders Monitor Before Closing

During the period between loan approval and closing, lenders actively monitor for specific financial activities that could indicate increased risk. This includes the opening of new credit lines, such as new credit cards or car loans. An increase in existing debt balances also raises a flag, as it can significantly alter the borrower’s debt-to-income (DTI) ratio, a key metric lenders use to assess repayment capacity. Changes in the DTI ratio can impact loan eligibility or terms.

Lenders also scrutinize bank statements for large or unusual deposits and withdrawals. Unexplained large deposits may require documentation to verify the source of funds, ensuring they are not undisclosed loans or gifts. New derogatory marks on a credit report, such as missed payments or new collection accounts, are closely watched. A significant change in employment status or income, including job changes or reduced hours, can also jeopardize loan approval because it affects the borrower’s ability to make consistent payments.

Borrower Actions to Maintain Eligibility

To maintain loan eligibility and ensure a smooth closing, borrowers should keep their financial profile stable. Refrain from opening any new credit accounts, including credit cards, personal loans, or vehicle loans, as these can increase debt and impact credit scores. Avoid large purchases, such as new furniture, appliances, or vehicles, particularly if these purchases require new credit or substantially deplete cash reserves needed for closing costs.

Maintaining current employment status is important, as lenders often verify employment just before closing. Any significant job changes, even if for higher pay, could lead to delays or re-evaluation of the loan. Borrowers should also avoid co-signing loans for others, as this adds a contingent liability to their credit profile. Continuing to pay all existing bills on time is essential to prevent any negative marks on the credit report that could lower a credit score. If unavoidable financial changes occur, communicate immediately with the lender to discuss the situation and determine potential impacts.