Do Agreement in Principle Affect Your Credit Score

Agreement in principle, also known as AIP, is a statement from a lender that they would be willing to lend you a certain amount of money for a mortgage. It is a pre-approval process that helps you understand how much you`re eligible to borrow before you start looking for a property.

The question that arises for many who are considering getting an AIP is whether it affects their credit score. The short answer is that it doesn`t impact your credit score. An AIP is just an indication of what you`re eligible to borrow, and it doesn`t require any credit checks or credit searches.

An AIP is based on some rough estimates of your income and expenses. However, it is essential to note that a full mortgage application requires a formal credit check. Your credit report will then be assessed, and this may impact your credit score.

The credit check carried out during the mortgage application process will look at various factors such as your credit history, loan repayments, and outstanding debts. It`s essential to keep in mind that every time a lender checks your credit report, it leaves a mark, also known as a hard inquiry.

A hard inquiry can temporarily lower your credit score. Therefore, it`s essential to ensure that you are only applying for mortgages that you intend to take up. If you have multiple hard inquiries within a short period, then it could start to impact your credit score and your ability to borrow.

In summary, the agreement in principle itself does not impact your credit score. However, the full mortgage application process, which includes a credit check, will evaluate your credit report and consequently affect your score. Therefore, it`s crucial to be mindful of only applying for mortgages that you are confident you`ll take up.

In conclusion, an agreement in principle is an essential step when considering a mortgage. It provides you with an idea of how much you`re eligible to borrow before you begin your property search. It does not impact your credit score, but the full mortgage application process, which includes a credit check, will. Be mindful of only applying for mortgages that you`ll take up to keep your credit score in check.