- Prequalification usually uses a soft credit inquiry, which does not affect your credit score.
- A formal application triggers a hard inquiry, which can lower your score slightly for a time.
- Prequalify with several lenders, then submit one full application to the best offer.
The best way to know what a personal loan will cost you is to see real, personalized offers. Prequalification makes that possible without the credit-score hit of a full application. Here’s how it works and how to use it well.
Soft inquiry vs hard inquiry
| Soft inquiry | Hard inquiry | |
|---|---|---|
| When it happens | Prequalification, checking your own credit, some account reviews | When you formally apply for credit |
| Affects your score? | No | Usually a small, temporary drop |
| Visible to other lenders? | No | Yes |
| How long it’s on your report | Shown only to you | Two years (FICO scores consider the last 12 months) |
According to FICO, a single hard inquiry typically takes fewer than five points off a credit score. Several hard inquiries in a short time can add up and may make lenders cautious.
A note on rate shopping
FICO scoring models treat multiple mortgage, auto and student loan inquiries within a short shopping window as a single inquiry. That de-duplication generally does not apply to personal loans. That’s why prequalifying with soft checks, and then filing just one full application, is the smart way to shop.
Prequalification vs preapproval vs application
- Prequalification: an estimate based on information you provide plus a soft credit check. Not a guarantee.
- Preapproval: some lenders use this term for a firmer conditional offer; it may still use a soft pull, but check.
- Application: the lender verifies your identity, income and credit with a hard inquiry and makes a final decision.
Lenders use these words differently. Look for language such as “checking your rate won’t affect your credit score” before you submit.
What you’ll need to prequalify
- Name, address, date of birth and Social Security number (for the soft pull)
- Annual income and employment status
- Monthly housing payment
- Desired loan amount and purpose
Step-by-step: how to shop with prequalification
- Check your credit first so you know which tier you’re in: excellent, good, fair or bad.
- Pick the same amount and term for every lender so offers are comparable.
- Prequalify with three or more lenders on the same day or week.
- Compare APR, payment, total cost and fees. See APR vs interest rate.
- Apply with your top choice and keep a backup in case the final offer changes.
Why the final offer can differ
- Income or employment couldn’t be verified as stated
- The hard credit report shows something the soft report didn’t
- You changed the loan amount or term
- Your debt-to-income ratio is higher than estimated
Protect your information
Only enter your Social Security number on secure (https) lender or marketplace sites you trust. Be wary of unsolicited offers by text or social media. Legitimate lenders never ask for upfront fees in gift cards or wire transfers.
Estimate payments before you start with our personal loan calculator, then compare lenders in our best personal loans guide.
Frequently asked questions
Does prequalifying for a personal loan affect my credit score?
No. Prequalification typically uses a soft inquiry, which doesn’t affect your credit score. Confirm on the lender’s page before you submit.
Is a prequalified rate guaranteed?
No. It’s an estimate. The final rate depends on verification of your information and a hard credit check when you formally apply.
How much does a hard inquiry lower your score?
According to FICO, a single hard inquiry typically lowers a score by fewer than five points. Inquiries stay on your report for two years, and FICO scores consider those from the last 12 months.