The Community Home Lenders of America (CHLA) wants the three major credit bureaus — Equifax, Experian and TransUnion — to restore the pricing discounts that had been in place for soft credit pulls.
At the end of 2023, each of the credit bureaus announced that they were ending pricing discounts for soft credit pulls. Lenders were advised that a soft credit pull will effectively be priced the same as a hard credit pull based on the equalization of pricing in 2024.
“Soft credit pulls are a critical tool that our member mortgage loan originators use to work with underserved borrowers — particularly borrowers with credit blemishes — to improve their credit score and ultimately obtain a pre-qualification or an actual mortgage loan,” the CHLA wrote in a letter to the three credit bureaus on Wednesday.
Unlike a hard credit pull, a soft inquiry does not negatively affect a person’s credit score and does not activate trigger leads, causing an onslaught of calls to the consumer in an attempt to vie for their business.
While mortgage lenders do not charge consumers for the cost of credit reports — including the cost of these soft credit pulls unless a loan is closed — CHLA noted that these costs are inevitably passed along to borrowers in the form of higher fees.
“The elimination of the price discount for soft credit pulls will create more of a financial disincentive for mortgage lenders to work with borrowers that need help in improving their credit score (to obtain a prequalification or a mortgage),” the letter stated. “Ultimately, it could conceivably result in some lenders charging upfront for the cost of this service.”
Lenders viewed soft credit pulls “as a major consumer benefit,” using them to reduce initial file costs and keep mortgage costs down. They were able to take advantage of Fannie Mae and Freddie Mac programs that offer the ability to obtain initial underwriting approvals with a single-bureau report, the letter stated.
The CHLA expects soft-pull prices to increase by 200% to 300% compared to 2022 while soft-pull costs would rise 300% in 2024 relative to 2023.
In requesting action to restore pricing discounts for soft credit pulls, the CHLA pointed out the challenges of becoming a homeowner amid the 30-year fixed-rate mortgage rate doubling in the past two years, along with persistent home price appreciation.
“Younger families face unprecedented challenges in becoming homeowners in the current market environment,” the letter stated. “… Combined, these credit-scoring pricing increases just make the objectives of homeownership even harder, especially for American families trying to get on the economic ladder’s first rung.”
