Before shopping for a car, credit card, or personal loan, you must first pre-qualify your credit. What does it mean to pre-qualify credit, you may ask? Credit pre-qualification means that a lender goes through a borrower’s information and provides an estimate for credit. It is a rough estimate of your loan amount. When you pre-qualify for credit, it means that a lender is willing to provide you with a certain amount of money to make a purchase. It could be a home or a car, or a credit card. That allows you to have an idea of how much you may have at your disposal. So why should you pre-qualify your credit before you go shopping?
Pre-qualifying your credit before you go shopping for a car or anything else helps you eliminate any surprises. When you pre-qualify your credit, you have an idea of how much you have to spend at your disposal. That way, you will not face unforeseen circumstances such as insufficient funds or lack of credit. You can also eliminate any other surprises that may come up in the course of your purchase.
Reduces embarrassment (being turned down)
Imagine going to a car dealership to buy a car and then getting declined because you cannot afford it or getting declined by a credit card company halfway through the process. That could be a very embarrassing situation, especially when you are already all in. But when you have pre-qualified your credit, your chances of being turned down are reduced. You can shop for credit cards and personal loans with more certainty than you would without a credit pre-qualification. The seller is also aware of how much you have at your disposal and can assure that you will complete payment of whatever you choose to buy.
Stops multiple credit inquiries that lower your score
Each time you, a lender, or a bank checks your credit report, it is called an inquiry. There are two types of inquiries, hard inquiries and soft inquiries. Hard inquiries are what affect your credit score; soft inquiries don’t. A personal loan or a credit card would require a hard inquiry that will involve your credit score. Still, if your credit is pre-qualified before you go shopping, it reduces the number of credit report inquiries that lenders or banks may make and, consequently, will not damage your credit score.
Once you have pre-qualified your credit, you can then go ahead to shop for a car, a personal loan, or a credit card. Although this doesn’t always guarantee that your purchase is approved, it sure does help. To get pre-qualified for credits, make sure to have a strong credit history and a good score. If your credit score is low, you may want to beef up your credit report by making timely loan payments and meeting the loan agreement terms.