Auto loan refinancing is pretty straightforward. You take out a new loan with better terms to replace the existing one. But the process of obtaining this loan may include several steps, including a soft credit pull.
Many lenders use soft credit pulls for pre-qualification, allowing you to see potential rates and offers. But what do soft credit pulls actually mean in auto refinancing? Let’s find out.
Here are six important facts you should know about soft credit pulls going into auto refinancing:
- They Don’t Impact Your Credit Score
This is a huge relief for many borrowers. Unlike hard credit pulls that can temporarily lower your credit score by up to 5 points, soft pulls do not have an impact on your credit score. They simply give lenders insights into your borrowing history.
As a borrower, soft pull auto refinancing will help you compare options from different lenders and choose the one with the most favorable terms.
- They are Used for Prequalification
This is incredibly important. Many potential borrowers believe that if a lender runs a credit check, they’ll offer a final loan rate. This is not true.
Lenders like RefiJet use soft pulls only for prequalification. They don’t independently review your finances. Instead, they just take a brief overview of your credit history and give an estimate of the terms you might receive.
- Soft Pulls are Not Guarantees
Again, a soft pull isn’t a guarantee of a certain loan refinance term. It only gives you an idea about the rates you might receive.
Final approval, rates, and terms are always subject to a hard credit pull, which occurs when you formally submit a full application.
- Soft Pulls are Invisible to Other Lenders
Soft credit pulls may appear on your personal credit report, but that is visible only to you. Other lenders can’t see how many times institutions have pulled soft credits on you. This prequalification check won’t signal to other companies that you are actively seeking credit.
- Soft Pulls Don’t Usually Require Consent
A refinance lender can run a soft credit check without notifying you or obtaining your explicit permission. This is pretty common.
However, many lenders state on their websites that they run a soft pull before issuing a prequalification letter.
- They Only Require Basic Information
Soft credit pulls generally require basic information, such as your:
- Full name
- Current address
- Date of birth
- Social security number (SSN)
- Grant permission
Some soft pulls only require your name and current address.
How Soft Credit Pulls Differ
Lastly, let’s look at how a soft credit pull differs from a hard credit pull.
First off, a hard credit check impacts your credit score, but a soft pull doesn’t. People with six or more hard credit inquiries in one year are considered high-risk borrowers. Lenders might not offer favorable loan terms.
Moreover, a hard pull is visible to you and potential lenders. It also requires your explicit permission before being performed by an auto loan refinancer.
read more : Understanding High-Performance Digital Marketing for Small and Large Brands
