Getting loans off banks or certified lenders has, over the recent period, become more popular. This can be for a variety of reasons, including getting credit cards to work as a safety net in times of emergency, or even getting loans to buy expensive goods that you cannot afford otherwise. There are, however, a number of terms that people may come across during the process of obtaining such loans or credit that can be incomprehensible to them.
Among the most popular terms that one might hear when applying for credit, are pre-qualifying and pre-screening for credit. The two terms can often be confused or misunderstood. However, they are two totally different things and it is essential to understand the difference between each of them when applying for credit.
What is Prescreening for Credit?
When you apply for a credit loan, whether in the form of a credit card or an actual loan to use for a specific purpose, the lender would naturally ask you to provide some information about yourself to check for your eligibility. The credit solutions specialists at Softpullsolutions.com explain that prescreening mainly allows lenders to know more about the individuals or entities applying for credit through a number of tools and research tactics to filter their customers accordingly. Prescreening is also sometimes known as preapproving a credit. It can be used by lenders or businesses who give out loans in the form of materialistic goods of high-value to know more about their consumers. Lenders and businesses can do their research to obtain information about their consumers without asking them for their approval as it would be their legal right to do so.
What is Involved in the Prescreening Process?
The process of prescreening is fairly straightforward and almost entirely hassle-free for consumers. Lenders and businesses often have partnerships with the credit score reporting companies that can provide them with all the necessary information they need about the consumer before approving their credit. This is usually a final step before offering the consumer what they need and is done merely out of precaution and to follow all the correct legal procedures relating to the loan or credit.
What is Prequalifying for Credit?
The term prequalifying for credit is different from prescreening for credit, however, the process itself is not that different in execution. The biggest difference between the two terms is that when it comes to prequalification for credit, consumers must approve that the lenders or credit givers obtain information about them or on their behalf. Usually, a consumer looking to get credit would approach the bank or business that would be lending them, and they would ask them to prequalify them for the loan or credit.
It is a process that can give the consumers a rough idea of what it would be like if they applied for the loan but it does not guarantee the results. This is usually a service that is provided by businesses selling high-value goods like cars where buyers apply for the prequalification and provide their consent so that the lender or the business can look into their eligibility and provide the customers with the applicable options for their specific situation if any.
What are the Effects of Prescreening Or Prequalification on Your Credit Report?
People applying for credit pre-screening or pre-qualification might sometimes find themselves unsure of how either of them would affect their original credit report or credit score. Usually, when anything related to credit or getting loans is approached, it can come up on your credit scores and affect the credit report. Inquiries made for prequalification or prescreening would be recorded on your credit report when they are made by the bank or business that is lending you the money or offering you credit. But the good thing is, when you do eventually get your credit or loan, that, too, would be recorded on your credit report and would greatly enhance your credit scores.
On the other hand, some businesses and lenders could offer their consumers an option that does not go on their credit report or affect their credit score in any way. It is called a soft inquiry and it is usually requested during the prequalification step of the process. Soft inquiries give consumers a direction on how their credit application might go based on the set information that they provide the lender. The process is kept entirely away from all credit reports so it would not impact any future applications or decisions on your credit loans.
Does The Process Differ Between Individuals And Companies Applying For Credit?
Many people considering applying for credit loans can get confused as to how the process would differ if they apply as individuals vs when they apply for their business or company. The idea behind prequalifying and prescreening for credit for both options is similar, but the execution can be slightly different and the information required to process your request might differ between individuals and businesses. Research done by the lenders on both prequalifying and prescreening for individuals is usually done on the person’s spending history and their financial habits to ensure they would be using their credit for the purpose they listed in their application and would then be able to repay their loans. Whereas when it comes to working on prequalifying and prescreening for businesses, it depends greatly on the investments in place for said business and the type of work quality they produce.
Applying for credit loans can be a long and confusing process with many financial and legal terms that not everyone is necessarily familiar with. Prequalifying and prescreening for credit are two terms that one would hear quite often when they consider applying for credit. They might seem like the same thing, but in reality, they are different although with certain similarities.
Before applying for credit, you should make sure you are familiar with each term and can fully understand what you are consenting to and applying for so that you are not put in a situation that you do not necessarily want. It is important to discuss any process that involves your credit report and score with your lender to ensure you are not putting yourself or your business in financial risk.
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