While most people understand that missing payments on a loan can significantly lower their credit score, it's important to note that simply applying for a loan can also have an impact on your credit.
This is because the application process can trigger a hard inquiry, which differs from a soft credit check that is typically used for background checks and does not affect your credit score. A hard inquiry, on the other hand, can hurt your credit score.
So, how can you qualify for a loan without hurting your credit score? Well, the answer is to do your research on loan providers along with eligibility criteria and to limit your applications.
It’s important to limit your applications because most lenders or providers will perform a hard credit inquiry before any real terms are agreed upon.
There are a few ways in which a hard inquiry can affect your credit score:
If you’re worried that there might be something on your credit report that the lender will not like, then you should try to manage your hard credit inquiries.
You can do that by monitoring your credit (this will help you stay on top of the things that can affect a lender’s decision) and applying only for the loans that you urgently need. By the way, getting prequalified for a loan also won’t trigger a hard inquiry.
Loan prequalification is a great way to estimate your chances of getting the loan that you need. If you get prequalified by the lender, this will mean that you have extremely high odds of getting approved once you finally apply for the loan.
Sometimes, the terms ‘prequalification’ and ‘preapproval’ are used interchangeably, but in some cases, they are quite different.
Do bear in mind that not all lenders offer a pre-qualification option. If you notice such phrases on the company’s website as ‘view your rates’ or ‘check your rates’, the chances are high that the lender does offer such a service.
If you’re unsure, you can always call the lender directly and get your questions answered.
Here is an example of how prequalifying for a loan might work:
As stated above, the prequalification process allows for a more expedient loan experience. The lender has streamlined the process for you by examining your financial information ahead of time.
Simple Fast Loans is an online lender with a lot of experience in online installment loans for borrowers with less-than-perfect credit. How does this work? Simple Fast Loans uses more than just your debt-to-income ratio and your credit score to decide on your loan. Instead, each loan decision takes into account unique factors like rent payments and utility bills.
To instantly get the loan decision, you would have to:
Your income, identity, and bank account information will all be verified electronically. Simple Fast Loans representatives understand that nobody wants to waste their precious time, especially if someone is in a situation where they urgently need money.
So, you wouldn’t have to drive to the lender’s office and wait for the decision for days.
If a lender offers prequalification services, this is something that you should take advantage of as you’ll be able to assess your chances of getting approved for a loan without hurting your credit.
With Simple Fast Loans, however, you will be able to get a loan decision in a matter of minutes. And the best part is that you might be able to receive the much-needed cash the very same day.