Pre-approvals almost lift off all the strict rules and regulations that accompany financial loans, and can even help you avoid a run-in with Creditors Bureau USA collections.
At the same time, pre-approvals often require a hard inquiry, which can damage your credit score. This can make seeking pre-approval with a hard inquiry counter-productive, which is why it can be helpful to solicit advice from the best credit repair services in Chicago.
Understanding the Terms
Pre-Approval
When it comes to finances, pre-approved is similar to pre-qualification. When you apply for a loan, the financial institution or lender will run a check on your financial history and records.
They can do this by evaluating the documents you submit to them. If you have sound and reliable records, they will issue you a pre-approval letter in which they specify the amount you can borrow. If you don’t receive this letter, we recommend asking about the reason for rejection from your lender, in case the issues can be rectified.
Once you’ve received a pre-approval letter, this means you’re eligible for the loan, but it doesn’t mean you have received the loan. Once you receive the pre-approval loan, you can express your interest to pursue the matter further.
Hard Inquiry
A hard inquiry is a request from a lender to view your complete credit report. A lender may request this information when you apply for a car loan, a home loan, or any other loan. This can damage your credit score as it will stay on your credit report for about two years, but will only drop your credit score by between one and five points.
You don’t have to worry about one or two hard inquiries–but if you have over five hard inquiries within a short time period, your credit score can be significantly affected.
How Do You Get Pre-Approved Without a Hard Inquiry?
You might be looking for a way to get pre-approved without a hard inquiry if you have a bad credit score. Acquiring a pre-approval without a hard inquiry is difficult, but it is not impossible.
Some banks and financial institutions offer a special service in which you can submit the necessary documents and receive pre-approval without a hard inquiry. You may have to abide by a few of their custom terms, but this might save your credit score from further damage.
Another way to avoid a hard inquiry is to assure your lender of your reputation. You can do so by clearing out any prior debts and dues.
It’s also a good idea to avoid asking for more than two different types of loans at one time. If you repeatedly request loans and get rejected, the lender will have no option but to request a hard inquiry.
Should You Get Pre-Approved Without a Hard Inquiry?
So, you can get pre-approved without a hard inquiry, but does this mean you should? How beneficial is a pre-approval without a hard inquiry?
Technically, it is the same either way–you can enjoy the same benefits of pre-approval with or without a credit check. However, it’s a great idea to opt for pre-approval without a credit check if you have a low credit score and are looking to secure some decent loans.
The same is true if you think you’ll need time–for example, if you get a pre-approval for a home loan and you need time to choose your dream home, it’s best to opt for a loan without a hard inquiry. This eliminates the risks posed by the regular method. Every pre-approval requires renewal after ninety days, so by the time you finally settle on a home, you’ll have to repeat the process, bringing another hard inquiry to your credit report and further damaging your credit score.
Want to find out if payday loans do a hard inquiry on your credit? We’ve got the answers–check out our recent article.