When you`re looking to get a mortgage, one of the first steps you might consider is getting an Agreement in Principle or AIP. This is a document which confirms that a lender is willing to lend you a certain amount of money based on your financial information. But does getting an AIP affect your credit score? In this article, we`ll explore this question in detail.
Firstly, we should clarify that an AIP is not a formal mortgage offer. It`s simply an indication of how much a lender is likely to let you borrow, based on a preliminary review of your financial circumstances. To get an AIP, you typically need to provide a lender with information about your income, expenses, employment status, and credit history. Based on this information, the lender will calculate how much they`re willing to lend you.
So, does getting an AIP affect your credit score? The short answer is no, not directly. When you apply for an AIP, the lender will typically perform a soft credit check on you. This means that they`ll look at your credit report to get a general sense of your credit history, but this won`t leave a mark on your credit file. So, there`s no need to worry that applying for an AIP will hurt your credit score.
However, there are some indirect ways in which getting an AIP could affect your credit score. For example, once you have an AIP, you might be tempted to start house-hunting and making offers on properties. If you make multiple offers on different properties, this could result in multiple hard credit checks on your credit file. Hard credit checks can have a negative impact on your credit score, as they suggest that you`re actively seeking credit and might be having financial difficulties.
Another way in which getting an AIP could affect your credit score is if you choose to apply for a formal mortgage offer with the same lender who gave you the AIP. When you apply for a mortgage offer, the lender will perform a hard credit check, which could affect your credit score. However, this is not directly related to getting an AIP.
In conclusion, getting an AIP is a useful first step when you`re looking to get a mortgage. It won`t directly affect your credit score, as the lender will only perform a soft credit check. However, there are some indirect ways in which getting an AIP could affect your credit score, such as making multiple offers on properties or applying for a formal mortgage offer with the same lender. As with any financial decision, it`s important to weigh up the pros and cons before proceeding.
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