When obtaining a mortage loan, a lender can only provide a loan approval after analyzing the home buyer’s financial data. One point of financial data that is required for loan approvals are credit scores.
To obtain a home buyer’s credit score, each lender performs a hard credit inquiry typically from three credit bureaus: Equifax, Experian, and TransUnion.
Typically, lenders will then select the median score of the three to serve as the credit score factor for the home buyer.
Unfortunately, a hard credit check negatively impacts one’s credit score, so it is beneficial if the home buyer strategizes when to allow for such credit checks during the mortgage loan shopping process.
When “shopping” for mortgage loans, it is common for home buyers to request loan estimates from different lenders to compare rates and other fees before selecting a lender.
During the loan shopping process, it is overwhelmingly common for lenders to request a social security number during the application process to perform a credit check. Surprisingly, it is not required for home buyers to undergo hard credit inquiries if they only seek loan estimates during their mortage shopping process.
<aside> ⚠️ A hard pull credit check is NOT necessary for mortgage loan estimates
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When working with a mortgage lender, it is acceptable to request that the lender holds off from performing a hard credit check for the creation of a loan estimate, and only allow for hard credit checks after the home buyer has compared loan estimates and finalized their list of potential lenders.
If a lender requests a social security number, then it almost always means that they wish to provide a hard credit inquiry; it should be acceptable for home buyers to decline providing social security numbers until they are ready to trigger the credit check.
<aside> ⚠️ If a lender requests a social security number, it usually means that they want to perform a hard credit inquiry
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By law, lenders can only execute hard credit inquiries if they have consent from the consumer. Thus, it is essential that home buyers read loan applications carefully to avoid accidentally submitting to hard credit inquiries.
If a lender agrees to withhold triggering a hard credit inquiry while the home buyer shops for lenders, the lender will still ask the home buyer for an estimate of their credit.