Does Pre-Approval Affect Your Credit Score?

Obtaining an initial assessment for financial products like loans or credit cards is a common step for individuals exploring their borrowing options. This preliminary evaluation, often termed “pre-approval,” provides an early indication of potential eligibility and the amount of financing one might receive.

Pre-Approval Versus Pre-Qualification

Lenders often use the terms “pre-qualification” and “pre-approval” to describe different stages of a preliminary assessment, though their definitions can sometimes overlap depending on the institution. Pre-qualification typically involves a less formal review of an applicant’s financial situation, often based on self-reported income and debt information. This process aims to give a general estimate of how much one might be able to borrow, serving as an initial gauge of affordability.

Pre-approval, conversely, generally signifies a more thorough preliminary assessment. It often requires applicants to provide documentation, such as pay stubs, W-2 statements, or tax returns, allowing the lender to verify financial details. While both processes offer an early indication of borrowing capacity, neither guarantees final loan approval.

Understanding Credit Inquiries

When a lender assesses an individual’s creditworthiness, they perform a credit inquiry, which falls into one of two main categories: soft inquiries or hard inquiries. A soft inquiry occurs when a credit report is accessed for informational purposes, such as when you check your own credit score or when a company prescreens you for a promotional offer. These inquiries are often not visible to other lenders and do not affect one’s credit score.

A hard inquiry, also known as a hard pull, happens when a lender formally checks an applicant’s credit history as part of an application for new credit. This occurs for products like credit cards, mortgages, or auto loans. A hard inquiry requires the individual’s permission and becomes visible on their credit report to other lenders.

How Credit Inquiries Affect Your Credit Score

Soft inquiries have no impact on an individual’s credit score, meaning they can check their own credit reports or receive pre-qualified offers without concern. In contrast, hard inquiries can cause a small, temporary dip in a credit score. Typically, a single hard inquiry might lower a score by fewer than five points, though some sources indicate it could be up to 10 points.

Hard inquiries generally remain on a credit report for up to two years, but their influence on credit scores often diminishes after 12 months. When shopping for certain types of loans, such as mortgages, auto loans, or student loans, multiple hard inquiries made within a focused period are often treated as a single inquiry by credit scoring models. This “rate shopping” window typically ranges from 14 to 45 days, allowing consumers to compare offers without multiple score penalties.

The Full Application Process

While pre-qualification and pre-approval serve as useful preliminary steps in the borrowing journey, they do not represent the final stage of securing credit. Moving beyond these initial evaluations requires a formal application.

When an individual decides to proceed with a full application for a specific credit product, the lender will conduct a hard inquiry as a necessary part of the underwriting process. This final credit check allows the lender to thoroughly verify all financial details and make a definitive lending decision.