Does home loan pre-approval impact my credit score?

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Getting pre-approval is an important step in the home loan process. Not only does it give you an idea of where you stand in a lender’s eyes, it can give you an edge over other buyers when it comes time to make an offer.

But can getting pre-approved hurt your credit score? Below, we explore some ways you can keep your credit profile in good health when seeking pre-approval.

First of all, what is pre-approval?

Pre-approval is a statement provided by a lender indicating how much you would likely be able to borrow. It is conditional, temporary, and there’s no guarantee that you will eventually be granted the loan you were pre-approved for.

Pre-approval usually lasts for around three to six months. So if it’s about to expire and you haven’t yet found a home, you’ll have to re-apply or ask your lender if it can be extended. 

Having pre-approval up your sleeve lets you narrow your search to budget-friendly properties. It can also signal to real estate agents that you’re serious about buying, potentially giving you a better shot at securing the home you’re after.

Will getting pre-approval affect my credit score?

Before your lender can grant you pre-approval, they will have to check your credit report for signs that you have been a responsible borrower in the past. When your lender does this, it will trigger what’s known as a ‘hard enquiry.’

A single hard enquiry won’t jeopardise your credit score, but if you rack up several over a short period of time it can certainly weaken it. 

So if you’ve applied for pre-approval with multiple lenders in the hopes of finding the best deal, you might give banks the impression that you’ve been rejected multiple times. In turn, they might be reluctant to lend to you.

What can I do to protect my credit score?

  • Check your credit report for mistakes before you apply
  • Limit the number of applications
  • Extend pre-approval instead of re-applying

If you know a lender will be combing through your credit history, it might be a good idea to request a copy of your credit report beforehand to make sure all the information listed is accurate. 

If there are mistakes (or issues that have since been resolved), you’ll need to get in contact with your bank to set the record straight. 

When it comes time to apply, one of the best things you can do is research your options thoroughly before contacting any banks or lenders. Avoid the scattershot approach and try to hone in on one or two that suit best.

And if your pre-approval period is about to expire and you still haven’t settled on a property, consider having it extended rather than re-applying. If you have to re-apply, it might be better to stick with the same lender rather than finding another one.

What comes after pre-approval?

Once your lender has deemed you a suitable candidate and granted you pre-approval, you can start looking for a home with a clear idea of how much you’ll be able to spend.

Your to-do list will now consist of finding the right property. Once you’ve done that, you can begin the formal home loan approval process

Your lender will conduct a property valuation and draw up a contract of sale. They’ll also examine your finances a final time to make sure that you can still comfortably afford to service a loan.

If you’re thinking of taking out a loan but aren’t too sure where to start, visit our home loan comparison page, or browse the selection below.

Home loan comparisons on Mozo - last updated 5 July 2022

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    Initial monthly repayment
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    2.96% p.a.

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    Initial monthly repayment
    2.64% p.a. variable
    2.56% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

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    Variable Rate Home Loan

    Owner Occupier, Principal & Interest, LVR <80%

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    Initial monthly repayment
    2.59% p.a. variable
    2.49% p.a.

    $5000 refinance cashback. Owner-occupier refinancers only living in NSW/VIC/SA metro and inner regional areas. Receive up to an additional 0.15% off your rate as you pay off the loan. Receive bonus payments up to $2,500. T&Cs apply. Mozo Experts Choice Award winner for 2022^.

  • Basic Home Loan

    Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    2.84% p.a. variable
    2.84% p.a.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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