One of the most common surprises for homebuyers is a last-minute credit check before closing. Yes, even after you’ve signed documents on that new house in Irvine, CA and scheduled movers for your home in Madison, WI, your credit could still be reviewed before you officially get the keys. So, when is the last credit check before closing and what does it mean for your loan?
Lenders usually perform a final soft credit check 1 to 3 days before closing to confirm your financial status hasn’t changed. They check for new debts, significant drops in your credit score, or changes to your employment.
Let’s walk through the timing, purpose, and how to avoid any last-minute mortgage mishaps.
When is the last credit check before closing?
The last credit check before closing typically happens within 1 to 3 days of your closing date, and it’s usually a soft pull. This means the lender is taking one final peek to ensure that:
- You haven’t taken on any new debts, such as opening a new credit card or financing a car, which could affect your debt-to-income ratio.
- Your credit score hasn’t dropped significantly due to missed payments or increased balances, which could impact your loan terms or approval.
- Your job status hasn’t changed, as a sudden loss of income or job switch could affect your ability to repay the loan.
Why credit still matters even after mortgage pre-approval
If you’ve already received a mortgage pre-approval, you might think the hardest part is over, and in many ways, it is. However, your mortgage isn’t officially yours until the day you close and until then, lenders want to make sure you’re still financially sound. Your credit profile directly influences:
- Your loan approval: Any significant changes to your credit could lead lenders to reconsider or even withdraw their offer.
- Your interest rate: A higher credit score often means a better rate, so a drop in credit quality might increase your borrowing costs.
- Your monthly payment: Since interest rates affect your monthly payment, credit changes can impact how much you’ll pay each month.
- The overall risk the lender takes on: Lenders assess your credit to gauge the likelihood you’ll repay the loan; worse credit means higher risk on their end.
Lenders rely on your credit score and report to understand how you handle debt. But more than just your past behavior, they’re also watching for changes that could impact your future ability to pay. That’s why your credit is often checked multiple times during the mortgage process.
How many credit checks happen before closing on a home?
The mortgage process often includes up to three credit checks, each serving a specific purpose:
1. Initial pre-approval (hard pull)
This is your big one. It happens during pre-approval or right when you submit your mortgage application. The lender does a hard credit pull, which can slightly affect your score, but it’s necessary to:
- Review your credit score
- Evaluate your payment history
- Analyze your debt-to-income ratio (DTI) – the percentage of your monthly income that goes toward paying debts
- Check for red flags like recent collections or late payments
This step helps the lender determine how much you can borrow and under what terms.
2. Loan processing (occasionally)
Not every buyer experiences this, but this credit check can happen mostly if the underwriting or home search process takes longer than 90-120 days.
This is to ensure your profile hasn’t changed significantly and to comply with Fannie Mae and Freddie Mac standards, which require updated credit data within 120 days of closing.
It may be a hard or soft pull, depending on the lender’s policy.
3. Final credit check before closing (soft pull)
Here’s the one people don’t always expect. Just a few days before closing, sometimes even the day before, the lender will do a soft pull to verify your financial stability one last time. This won’t hurt your credit score, but it does give the lender a chance to:
- See if you’ve opened any new credit cards or loans
- Spot large purchases that could raise your DTI
- Ensure you’re still employed and in good standing
Even if you’re days away from closing, new debt can still jeopardize your mortgage.
Read>> How to Improve Your Credit Score Before Buying a Home
What is a soft pull vs. hard pull?
Hard credit pulls
A hard inquiry happens when a lender or financial institution accesses your full credit report to make a lending decision. These pulls:
- Appear on your credit report
- Can slightly reduce your credit score (usually by a few points)
- Are common when applying for mortgages, auto loans, and credit cards
- Typically stay on your report for about two years, but their impact lessens after a few months
Soft credit pulls
A soft inquiry, on the other hand:
- Does not affect your credit score
- Is not visible to other lenders
- Can be done without your formal consent, as long as it’s for permissible purposes like account reviews or pre-approval checks
The final credit check before closing is almost always a soft pull, meant to reassure the lender that you’re still in good financial shape.
Why lenders monitor credit throughout the mortgage process
You might wonder, “if I’ve already been approved, why check again?” It comes down to risk management. Mortgage loans are large and long-term. If your financial circumstances change before the ink dries, the lender could be at risk. Lenders want to make sure:
- Your debt-to-income ratio (DTI) hasn’t changed
- You haven’t taken on new financial obligations
- There are no red flags like missed payments or collections
- You’re still employed, especially in the same field and at the same income
In short, they’re looking to confirm you’re still the same responsible borrower they approved weeks or months ago.
What happens if your credit changes before closing?
A dip in your credit score or new financial activity doesn’t automatically kill your deal but it can slow things down. Here’s what might happen:
- The lender requests additional documentation.
- Your loan terms may change, possibly increasing your interest rate or down payment.
- Closing could be delayed,especially if underwriting needs to be redone.
- Worst-case scenario, your loan is denied.
If you know something has changed in your credit or finances, don’t wait; contact your lender immediately. Being upfront gives you the chance to explain and work through it.
How to keep your credit steady between application and closing
This is not the time for big financial moves. Here’s how to keep your credit (and mortgage) on track:
| Dos: | Don’ts: |
|---|---|
| Pay every bill on time | Open new credit cards or loans |
| Keep credit card balances low | Close old credit accounts |
| Stay in your current job (or industry) | Buy furniture, appliances, or a car on credit |
| Monitor your credit for unusual activity | Co-sign loans for others |
| Notify your lender of any financial changes | Apply for new financing |
| Maintain a stable address and contact info | Miss payments or skip bills |
Even something that seems small; like applying for a store card to save 15% can impact your credit or DTI and delay closing.
What to ask your lender
Don’t be afraid to ask your lender the tough questions. Good communication helps avoid surprises. Here are a few questions worth asking early in the process:
- “Will there be a final credit check before closing?” (Spoiler: likely yes.)
- “Will it be a hard or soft pull?” (Usually soft, but always confirm.)
- “What changes in my credit or job status should I report?”
- “How old can the credit report be at closing?”
Your mortgage isn’t final until you’ve signed on the dotted line. Keep things steady and protect your credit all the way to closing.
FAQs: Common questions about mortgage credit checks
1. Do lenders check credit after giving a clear to close?
Yes, many do a final soft credit check within days of closing to confirm your financial situation hasn’t changed.
2. Can a mortgage be denied after the final credit check?
It’s rare, but yes. If you’ve taken on new debt, changed jobs, or missed payments, the loan can still be denied. That’s why it’s so important to maintain financial stability through to the finish line.
3. What credit score is needed to avoid extra scrutiny?
While every lender has different requirements, a score of 700+ is generally considered strong and less likely to trigger extra checks.
4. Can a lender deny your loan after the closing disclosure?
Yes, the closing disclosure outlines the final loan terms but doesn’t guarantee funding. If there’s a major change between the disclosure and closing, the lender can still cancel or delay your loan.
5. Do they pull your credit day of closing?
Sometimes. Most lenders perform a soft credit pull 1–3 days before closing, which could fall on the day of closing in some cases, especially with same-day funding.