We have an office policy that ties a “Pre-Approval Letter” to “Property Tours”. It states,
A Buyer “must” have a “Pre-Approval Letter” from a lender verified by us before we show them any properties. Lenders who are verified by us DO NOT give a “Pre-Approval Letter” without pulling your credit, W-2/1099 or last 2 yrs tax return.
We will show buyers properties with a “Pre-Approval Letter” that is less than 90 days old.
We will show buyers properties which are less than or equal to the amount in the “Pre-Approval Letter”.
So, I hear “I Don’t Want My Credit Pulled Because It Will Lower My Credit Scores!” on a fairly regular bases, when I tell a Borrower who is looking to be Pre-Approved for a mortgage that a lender needs to run their credit in order to Pre-Approve them. The reason why a Borrower will give me this response is usually because of one of two reasons.
The first is because they have already talked to another Loan Originator who has told them to not let anyone else pull their credit, because it will lower their credit score. Generally the reason why a Loan Originator would tell a Borrower this is because they want to eliminate the competition, so they will scare the Borrower by telling them this.
The truth is that if two Loan Originators pull a Borrower’s credit within 14 days of each other, it will only count as 1 credit pull, and has absolutely no impact on the Borrowers credit score. In fact the Borrower’s credit can be pulled several times within that 14 day period, and it will only count as one credit pull. Could the Borrower see a change in their credit score from one pull to the other? Absolutely, but it will not be as a result of the credit pull, it will be because a Creditor has reported to the Credit Bureaus in between credit pulls. Having said this, a Loan Originator maybe correct in advising a Borrower to not have their pulled if the Borrower is boarder line on being able to qualify for a mortgage. But the Loan Originator should clearly explain why, and that the Borrower has the 14 day window to talk to competitors.
The second reason why I get the response “I Don’t Want My Credit Pulled Because It Will Lower My Credit Scores!” is because the Borrower knows that their credit is not good, and wants to see if they can get a Loan Originator to give them a Pre-Approval with out pulling their credit. To do so is silly on the part of the Borrower and Loan Originator. If the Borrower makes an offer on a property, and it is accepted, the Borrower’s credit will have to be pulled in order to submit a loan, and everything will fall apart at that point. By the way Borrowers who don’t want to have their credit pull for this reason will ALWAYS tell me that they have great credit.
If a Borrower does not let a lender pull their credit, our conversation is a very short one. A good lender will not consider even giving a Borrower a Pre-Qualification Letter based on looking at their credit later. If a Borrower does not let a lender pull their credit, they are wasting their Lender’s time, their Realtor’s time and their time.
There are two things that are an ABSOLUTE MUST when Pre-Approving a Borrower:
- Running a Borrowers Credit Report, which will show their credit scores, and monthly revolving debt.
- Looking at a Borrowers Income, so that Debt-To-Income Ratios can be established early on in the Pre-Approval process.
These two things are an ABSOLUTE MUST, anything short of this early on in the process is a waste of everyone’s time.