When applying for a mortgage or other types of loans, lenders may offer you an agreement in principle (AIP) to give you an idea of how much you can borrow. An AIP is not a guarantee that you will be approved for a loan, but rather a statement of how much a lender is willing to lend you based on the information you provided them.
One question that is often asked about AIPs is whether they can affect your credit score. The answer is no, an AIP itself does not have any impact on your credit score. This is because an AIP is not a formal application for credit and does not involve a hard credit check.
A hard credit check is a credit inquiry made by a lender or other financial institution when you apply for credit. This type of inquiry can have a negative impact on your credit score and can stay on your credit report for up to two years.
However, it is important to note that if you go on to apply for a loan based on the AIP, the lender will then conduct a hard credit check, which can impact your credit score. This is because the lender will need to verify the information you provided in the AIP and assess your creditworthiness in more detail.
In addition, if you have multiple AIPs from different lenders, this can also impact your credit score. This is because each AIP will result in a soft credit check, which can be viewed by credit reference agencies.
Soft credit checks do not have a negative impact on your credit score and are commonly used for background checks or pre-approval assessments. However, if you have multiple soft credit checks within a short period of time, this can give the impression that you are actively seeking credit, which can lower your credit score.
In summary, AIPs themselves do not have any impact on your credit score. However, applying for a loan based on an AIP can lead to a hard credit check, which can affect your credit score. Additionally, having multiple AIPs from different lenders can also impact your credit score if they result in multiple soft credit checks.