Does navy Federal pre approval affect credit score?

Does Navy Federal Pre-Approval Affect Credit Score?

As you start your home buying journey, one of the crucial steps is to get pre-approved for a mortgage. Navy Federal, one of the largest credit unions in the United States, offers pre-approval options for its members. But does Navy Federal pre-approval affect your credit score?

What is Mortgage Pre-Approval?

Mortgage pre-approval is a preliminary assessment of your creditworthiness by a lender, stating the amount they are willing to lend you based on your credit profile. It’s usually valid for a specific period, usually 30 to 60 days. Pre-approval is different from pre-qualification, which is an informal estimate of your credit capacity.

Does Navy Federal Pre-Approval Affect Credit Score?

The short answer is: not necessarily. Navy Federal pre-approval typically does not affect your credit score. Here’s why:

• Soft inquiry: When Navy Federal checks your credit report during the pre-approval process, it’s considered a soft inquiry, which doesn’t impact your credit score.
• Credit score not checked: During the pre-approval process, Navy Federal may not even check your credit score. They might use other factors like income, credit history, and debt-to-income ratio to make an assessment.
• Preliminary assessment: Pre-approval is a preliminary assessment, and Navy Federal may not have access to your entire credit report. They may only review the most recent credit information to make a decision.

When Might Navy Federal Pre-Approval Affect Your Credit Score?

There are rare instances when Navy Federal pre-approval might affect your credit score:

• Hard inquiry: If Navy Federal requires a hard inquiry, which is a more comprehensive review of your credit report, it can temporarily lower your credit score. Hard inquiries stay on your report for two years.
• New credit accounts: If Navy Federal opens a new credit account or credit line for you during the pre-approval process, it might lead to a small dip in your credit score, as new credit accounts can temporarily lower your credit utilization ratio.
• Error on your credit report: If there’s an error on your credit report that Navy Federal discovers during the pre-approval process, it might affect your credit score.

Facts About Navy Federal Pre-Approval

Here are some additional facts to keep in mind:

• Free: Navy Federal pre-approval is free, unlike some other lenders that might charge fees for pre-approval.
• Binding: Navy Federal pre-approval is binding, meaning that if you choose to apply for a mortgage and meet the pre-approval conditions, you’ll be obligated to honor the pre-approval.
• Re-applyable: You can re-apply for pre-approval with Navy Federal at no additional cost, which might be helpful if your credit score or financial situation changes.

Consequences of Multiple Pre-Approvals

If you apply for multiple pre-approvals, you may face some consequences:

• Credit score impact: Multiple hard inquiries from different lenders can negatively impact your credit score.
• Higher mortgage rates: If you apply for multiple pre-approvals, lenders may assume you’re a higher credit risk, leading to higher mortgage rates.
• Lender scrutiny: Repeatedly applying for pre-approvals may lead lenders to scrutinize your credit history more closely, potentially causing a drop in your credit score.

Best Practices for Pre-Approval

To minimize potential credit score impacts and ensure a smooth pre-approval process:

• Only apply for pre-approval with Navy Federal: Applying for pre-approval with multiple lenders can lead to multiple hard inquiries.
• Monitor your credit report: Ensure your credit report is accurate and up-to-date to avoid errors.
• Keep your credit utilization ratio low: Avoid using too much credit and keep your credit utilization ratio below 30% to maintain a healthy credit score.
• Check with Navy Federal: Confirm with Navy Federal whether they use soft or hard inquiries for pre-approval.

In conclusion, Navy Federal pre-approval typically does not affect your credit score. However, there are exceptions to consider, and it’s essential to follow best practices to minimize potential impacts. If you have any questions or concerns about Navy Federal pre-approval or credit scores, consult with a financial advisor or the lender directly.

Navy Federal Pre-Approval FAQs

Conclusion

When it comes to Navy Federal pre-approval, the key takeaway is that it’s usually a soft inquiry that doesn’t affect your credit score. However, it’s essential to understand the exceptions and follow best practices to ensure a smooth pre-approval process. By being aware of the potential implications and taking proactive steps, you can make informed decisions throughout your home buying journey.