When you’re shopping for a loan, whether it’s a personal loan, mortgage, or auto loan, you want to find the best rates and terms available. Loan matching services can simplify this process by connecting you with potential lenders based on your financial profile. But a common concern borrowers have is whether loan matching hurts their credit score. The short answer is: it depends on how the service checks your credit. Here’s what you need to know about loan matching and its impact on your credit.
How Loan Matching Works
Loan matching services, also known as loan marketplaces or aggregators, help borrowers compare loan offers from multiple lenders in one place. These platforms typically ask for basic financial information, such as your income, employment status, and credit score range, to match you with lenders that fit your needs.
Some loan matching services perform a soft credit inquiry, which doesn’t affect your credit score. Others may require a hard credit pull, which can temporarily lower your score by a few points. Understanding the difference between these two types of credit checks is key to minimizing any negative impact.
Soft vs. Hard Credit Inquiries: What’s the Difference?
Not all credit checks are created equal. Here’s how soft and hard inquiries differ:
- Soft Inquiry: A soft pull is a preliminary credit check that doesn’t affect your credit score. Lenders or loan matching services use it to pre-qualify you for offers without a full credit review. Examples include checking your own credit score or pre-approval offers.
- Hard Inquiry: A hard pull occurs when a lender reviews your credit report as part of a formal application. This type of inquiry can lower your score by a few points and stays on your report for up to two years (though its impact diminishes over time).
Many loan matching platforms use soft inquiries initially, but if you proceed with a formal application, the lender will likely perform a hard pull.
Does Loan Matching Always Hurt Your Credit Score?
Not necessarily. If a loan matching service only uses a soft inquiry to generate offers, your credit score won’t be affected. However, if the platform requires a hard pull—or if you move forward with a lender who does—your score may take a small hit.
Here are a few factors that determine whether loan matching impacts your credit:
- Type of Credit Check: Always confirm whether the loan matching service uses soft or hard inquiries before submitting your information.
- Multiple Hard Inquiries: If you apply with multiple lenders in a short period (e.g., when rate shopping for a mortgage or auto loan), credit scoring models often treat these as a single inquiry if done within a 14-45 day window, depending on the scoring model.
- Your Credit Profile: Those with fewer accounts or shorter credit histories may see a slightly larger impact from hard inquiries.
How to Minimize the Impact on Your Credit Score
If you’re concerned about loan matching affecting your credit, follow these tips:
- Choose Platforms That Use Soft Inquiries: Look for loan matching services that explicitly state they perform soft credit checks for pre-qualification.
- Limit Applications: Only proceed with formal applications (which trigger hard pulls) for lenders you’re seriously considering.
- Rate Shop Within a Short Window: If you’re applying for a mortgage, auto loan, or student loan, submit all applications within a focused period to minimize the impact of multiple hard inquiries.
- Monitor Your Credit: Regularly check your credit report to ensure accuracy and track any changes due to inquiries.
Conclusion
Loan matching doesn’t have to hurt your credit score—if you use services that rely on soft inquiries for initial offers. However, once you proceed with a formal application, a hard inquiry may slightly lower your score. The key is to be selective about where and how often you apply for loans. By understanding the difference between soft and hard pulls and shopping strategically, you can find the best loan offers without unnecessary damage to your credit.