5 Reasons Soft Credit Pulls Are Best During Mortgage Lending

As a lender, you have options when pre-qualifying borrowers for a mortgage. You can run a soft or hard credit pull. Soft credit pulls offer more benefits, increasing your chances of keeping the lead and saving you money. Sometimes a lot of money — depending the on the credit reporting agency, a soft credit pull could be just a quarter of the cost of a hard credit pull.

CreditXpert’s Custom Plans can be actually be built using the credit data from soft pulls or hard pulls — so a borrower can continue their credit improvement journey while still keeping them safe in your pipeline.

Is a mortgage soft pull right for you? Here are five reasons to consider it for your borrowers:

Avoids Trigger Leads

You’d think your lead is yours alone, but if you do a hard credit check, there’s a good chance the credit bureaus could sell the information to other lenders. This opens up more doors for the borrower and reduces the likelihood that you’ll close the loan.

In short, it increases your competition, and who wants that? So why open Pandora’s box unless necessary? If you wait to do the hard credit pull until you’re 100% sure the borrower qualifies AND is on board with using you as their lender, you can do the hard credit pull last minute, decreasing the risk of trigger leads and closing the deal.

Unfortunately, trigger leads happen even if borrowers don’t want them. As soon as word is out that they are in the market for a loan, it’s like the sharks come out of the water. When other lenders purchase your borrower’s information, they will likely contact them, trying to lure them away from you.

Sticking to a soft credit pull can reduce that risk because they don’t create an inquiry on a borrower’s credit report. This helps ‘protect the lead,’ keeping it in your court.

Keeps Lead Safe with Lender

Chances are you work hard to get your leads. Whether you buy them, have organic leads, or receive referrals, the last thing you want is to share leads for a mortgage. A soft pull can keep the lead safe with you.

Of course, if you buy the lead from a lead generation company, it depends on the type of leads you buy, whether they are exclusive or sent to multiple lenders. If the lead is shared, you must do your part to show that you are the lender to choose. However, the leads you create yourself, primarily referrals, should be kept safe with you.

After all, you put forth a lot of effort to get the lead by providing exceptional customer service and getting current borrowers to trust you. So why let other lenders lure them away just because they get a ‘trigger lead’?

Sticking to a soft credit pull will ensure you do what you can to keep the potential borrower’s attention and close the deal. But, again, don’t let the cat out of the bag until it’s too late and the borrower is set on working with you. At that point, do the hard credit pull, but rest assured that the loan is yours.

Doesn’t Damage Consumer’s Credit

No consumer wants their credit score to drop when shopping for a mortgage. However, a hard pull creates an inquiry on the credit report, causing the credit score to fall slightly. When you instead use a soft pull, loan approval is easier because the borrower’s credit score doesn’t change.

This is most important when borrowers have worked hard to increase their credit scores to get loan approval. For example, if they were already borderline or had to work hard to get their credit score to the minimum allowed by the loan program, an inquiry can knock them below where they need to be.

Soft credit pulls allow borrowers to determine what they might qualify for without doing any damage. This is especially important if they’re still working on their credit. Seeing their current credit and advising them on what’s needed to get approved can help them get the most favorable loan terms while increasing your chances of closing the loan.

It contains the Same Information as a Hard Pull

A soft credit pull contains the same information as a hard pull. You aren’t getting less information or not being supplied with the borrower’s credit score. You receive the same information as you would if you did a hard credit pull.

Lenders can have all the necessary information when qualifying a borrower for a mortgage. A soft pull includes the following information, just like a hard pull:

• Mortgage history
• Credit card history and usage
• Student loan information
• Personal loan information
• Civil judgments
• Bankruptcies
• Foreclosures
• Repossessions
• Employment information
• Previous address information

You get the same information you’d get with a hard pull without the risk of damaging the borrower’s credit score. If you find the borrower has a borderline credit score, you can work with them to get the credit score where needed, allowing a cushion for the hard inquiry when the time comes.

More Consumers are Willing to Allow It

Today’s consumers are much more careful about who they share their private information with due to the large number of scams and fraud. Since soft credit pulls don’t require a social security number, more borrowers may be willing to allow the soft credit pull to see what loans they may get.

When you have a borrower’s attention, knowing what they can qualify for, you have a better chance of closing the sale. On the other hand, if you must insist on obtaining the borrower’s birthdate and social security number, you’ll likely receive more pushback from potential borrowers, especially cold leads or those that weren’t referrals.

When you have more information about them, it’s easier to determine if a borrower qualifies for a loan.

Final Thoughts

Soft credit pulls may feel like the ‘easy way out’ when qualifying borrowers for a loan, but it’s the smartest strategy lenders can use. Making potential borrowers feel comfortable with you first and only asking for a soft pull may make it easier to close more deals.

To learn more about how CreditXpert Platform uses soft credit pulls to build custom credit plans for borrowers, click here to speak to a product specialist.