Final answer:
To protect their credit score, clients should complete pre-approval applications from multiple lenders within a 14- to 45-day window, which credit scoring models regard as rate shopping. Providing proof of stable income, offering collateral, or having a cosigner can further reassure lenders.
Step-by-step explanation:
In order to minimize the impact on a client's credit score when seeking pre-approval from multiple lenders for a loan, such as an auto-loan or mortgage, the client should aim to complete all applications within a 14- to 45-day window. This period is generally recognized by the credit scoring models as rate shopping and will count multiple hard inquiries for the same type of loan as a single inquiry. This practice helps prevent a significant drop in the client's credit score, as multiple inquiries can be seen as a sign of credit risk if spread out over a longer period.
Additionally, a borrower can reassure the bank of their creditworthiness by having a stable source of income, a good credit history, offering collateral, or securing a cosigner. Transparency about the use of personal data, monitoring one's credit history for identity theft, and understanding the terms of the loan are critical practices for the potential borrower.