Key Takeaway: Prequalifying for a credit card or loan shouldn’t affect your credit scores because lenders typically perform a soft credit inquiry. But “prequalification” can mean different things to different lenders, so clarify the lender’s process before applying.
Prequalifying for a credit card or loan typically won’t affect your credit scores. That’s because lenders use a soft credit inquiry instead of a hard inquiry.
Checking your potential rate is a smart way to compare terms before you officially apply, but keep in mind your rate and terms may change when you do.
If you want to check your credit before prequalifying to see where you stand, Credit Karma provides free VantageScore 3.0 credit scores from TransUnion and Equifax.
- What is a soft credit inquiry?
- Is prequalification the same as preapproval?
- If I’m prequalified, am I guaranteed to be approved?
- FAQs about how prequalification affects your credit scores
What is a soft credit inquiry?
Also known as a soft pull or soft credit check, a soft credit inquiry is when you or a company checks your credit for informational purposes. A soft inquiry won’t affect your credit scores. And you might not even know a soft inquiry has occurred.
When you prequalify for a loan or credit car , a lender will typically perform a soft inquiry to predict whether you’re likely to get approved. A hard inquiry, which may lower your credit scores by a few points, will only occur if you go ahead and formally apply.
What’s the difference between a soft and a hard inquiry?
A soft inquiry generally occurs when you or a third party checks your credit for informational or background purposes. A hard inquiry, on the other hand, is typically recorded on your credit reports whenever a credit card issuer or lender reviews your credit after you apply for a credit card or loan.
Here’s a closer look at how soft inquires and hard inquiries compare:
- Credit impact: A soft credit inquiry won’t affect your scores. But a hard inquiry may lower your scores temporarily by a small amount.
- How long it remains on your credit report: Even though a soft pull might be noted on your credit reports, companies won’t be able to see it. A hard pull can stay on your credit reports for up to two years, though they only affect FICO® scores for 12 months.
Is prequalification the same as preapproval?
“Prequalification” and “preapproval” often are used as interchangeable terms. But sometimes companies make a distinction between these terms, depending on the type of loan you’re applying for.
For example, some mortgage lenders offer preapproval, but perform a hard credit inquiry and require you to submit all your loan documents for underwriting. It’s a good idea to read the fine print and understand what each company means when it says prequalification or preapproval.
If you don’t want to receive preapprovals (or prescreened offers) from lenders and credit card issuers, visit optoutprescreen.com or call 1-888-567-8688. Just note this only removes you from certain lists associated with the major consumer credit-reporting agencies. You might still receive some offers electronically or in the mail.
When can prequalification affect your credit scores?
In some cases — especially for mortgages or auto loans — a lender may treat “prequalification” as a full application and run a hard inquiry, which can have a slight negative impact on your credit scores. Before you submit any personal information, be sure to confirm with the lender which type of pull they’ll use.
If I’m prequalified, am I guaranteed to be approved?
No. Prequalification means you’ve passed the lender’s initial screen, but final approval still depends on a full review of your credit, income, debt-to-income ratio and other factors.
When you formally apply for a loan or credit card, the lender will often perform a hard inquiry and decide whether to approve you, and at what terms.
What should I do if I’m denied after prequalifying?
It can be frustrating to get prequalified and then get rejected. But the good news is there are things you can do to improve your situation and increase your chances of approval in the future, including:
- Review the adverse action notice: The Fair Credit Reporting Act requires companies to notify you after denying your application with an adverse action notice. If you didn’t receive one, reach out and ask for it. That way you’ll know why you were denied.
- Check your credit reports: Errors or inaccuracies could lower your credit scores and lead to denials. Check your reports for free on AnnualCreditReport.com and dispute any issues with the associated credit bureau. You can also use challenge errors on your TransUnion credit report with Credit Karma’s Direct Dispute™ tool.
- Work on the underlying factor: If your debt-to-income (DTI) ratio was too high and ultimately led to the denial, for example, focus on improving it. This might take some time but may eventually pay off when you apply again.
- Look for other products: Shop around and find other loans or credit cards designed for your particular credit profile. If you weren’t approved for an unsecured card, consider a secured card with more lenient credit requirements.
Are Credit Karma Approval Odds accurate?
Credit Karma’s Approval Odds highlight data-driven credit card and personal loan offers where you have a better chance of approval. Credit Karma offers labeled as Outstanding Approval Odds indicate those where your likelihood of approval is strongest.
Approval Odds can also give you a clearer view of possible personal loan rate estimates before you apply. They’re based on advanced models that review thousands of data points to suggest credit cards and personal loans that may fit your needs.
To generate these estimates, Approval Odds take into account …
- Insights from 20+ credit score versions
- Criteria that lenders use in their own decision-making
- Details from your personal credit profile
Approval Odds are estimates and not guarantees. The final approval decision is made by the lender after you submit a formal application.
Next steps
If you’re ready to prequalify for a loan or credit card, you can use usually apply for prequalification directly through a lender’s website or mobile app. Another option is to visit a marketplace, like Credit Karma, that aggregates offers to check if you may qualify.
Make sure you confirm the type of credit inquiry the lender will use before submitting your Social Security number.
FAQs about how prequalification affects your credit scores
The definition of “prequalification” and “preapproval” varies by company. Some companies have different requirements for each one, so it’s a good idea to check.
A hard inquiry could remain on your credit reports for up to two years. But various FICO® scores only factor them into your score calculation for the first 12 months.
No, checking your credit scores doesn’t hurt them. Checking your credit scores yourself, whether that’s through the credit bureaus directly or through your Credit Karma account, triggers a soft credit inquiry on your credit reports, which has no impact on your credit scores.
A prequalification could trigger a hard inquiry. This is particularly true if you’re applying for a mortgage or auto loan and the lender treats the prequalification as a formal application.
You can prequalify for as many credit cards as you want at the same time. Prequalification uses a soft credit check, so it won’t affect your scores. But keep in mind that applying formally for many cards or loans at the same time may affect your scores, though some scoring models group certain inquiries made within a short period of time together.
Not usually — a mortgage prequalification or preapproval often requires a lender to verify your income and assets in addition to performing a credit inquiry. A credit card prequalification is generally a quicker, less rigorous process that relies on the information you report and a soft credit inquiry.