does prequalification damage your credit score?
every time you apply for a credit card or a loan, the credit card company or lender puts a hard inquiry on your credit report to determine your creditworthiness. each time these hard inquiries hit, your credit score drops a few points. therefore, before applying for a credit card or a loan, it's always advised to research for the best product suited to fit your financial requirement. once you find the one that fits your requirement, the next step is to check if you have the eligibility to qualify for that particular credit card or loan. this way you can prequalify for the product before you actually take it.
what is prequalification?
you can request for prequalification or pre-approval before applying for almost any type of loan or credit card. you can directly contact the issuer or visit their official website to check the product details, eligibility, and other terms & conditions.
to get a prequalification, you need to submit a few important details such as - your employment status, current income, and debts. you can fill out the prequalification form online and upload these supporting documents to request for a prequalification. the lender would take some time to verify your information and give your results. you can also speak directly with a representative from the lender with which you wish to apply for a prequalification. once you receive pre-qualification approval, you can review the offer and decide whether you want to proceed with applying for the loan or credit card.
how to apply for a prequalification?
you can apply for a prequalification by filling out the application form available on the official website of the financial institutions or contacting the representative of the financial institutions directly. you also need to submit/upload your personal and financial information such as - name, address, identity proof, salary slip/income proof, etc. to prequalify for a credit card or a loan. the financial institution would then run a soft inquiry on your credit report to determine whether you would pay your debts on time. the prequalification assessment may take a few minutes to a few days depending on the financial institution.
can a prequalification hurt your credit scores?
when you apply for any credit, the financial institutions may run two types of credit inquiries to determine whether you qualify for the credit. when you apply for a prequalification, the financial institutions run a soft credit inquiry, which does not affect your credit score. viewing your own credit scores and reports also counts as a soft inquiry and would not hurt your credit score. hence, there is no risk in applying for a prequalification to find out whether you will get approval for a specific loan or credit card. however, you should note that getting a pre-qualification letter does not guarantee approval when you officially apply for a credit card or loan.
on the other hand, a hard credit inquiry, which takes place when you actually apply for a loan or credit card, can have a negative impact on your credit scores. however, the impact of a hard inquiry is temporary and will fade away with time. hard inquiries are run by the lenders to examine your credit report to determine whether you would be able to repay the debt on time.
what to do if your prequalification application is denied?
you can take the following steps to improve your situation if your prequalification application is denied:
- get a copy of your credit report and review the same to find any errors and areas where you need to improve.
- check if you need to start making extra payments to reduce your debt
- you can try to find a cosigner for a small loan or credit card to develop your credit history.
- you can also contact the financial institution directly and ask for the reason for the denial of prequalification.
- if you don't match the prequalification eligibility criteria set by a particular lender, then you should look for another lender or wait at least six more months before applying again.
does checking my credit scores on CRED count as a hard inquiry?
no, checking your own credit scores on CRED is not considered a hard inquiry. as mentioned earlier, checking your own credit report and credit score count as a soft inquiry and would not hurt your credit score. in fact, financial experts recommend reviewing your credit report from time to time to make sure all your information is correct, up-to-date, and free from any errors. you can get your credit report for free from CRED and as often as you would like without worrying about the negative impact on your credit score.