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What’s The Difference Between a Hard Credit Check and Soft Credit Check?

Whether you’re new to borrowing money, or you have borrowed before, you may know that the process often involves an inquiry into your credit report. But not all credit checks are equal — some are considered soft and others hard. What is the difference between hard and soft credit checks?

Some lenders can give you estimated loan terms or pre-approval based on a soft pull, but require a hard pull if you want to proceed with the application. However, it can sometimes be difficult to determine if even a short application will result in a hard or soft inquiry. If you’re in doubt, contact the lender and ask.

Before you begin, here’s what you need to know.

cartoon of credit card with arrows

Soft Credit Checks: What is a Soft Credit Check & How Does It Impact Your Credit Score?

A soft credit check (also commonly called a soft credit pull or soft pull) occurs when a company or person looks at your credit report for a reason other than underwriting a loan. Keep in mind that these may or may not happen with your permission. For example, some lenders allow you to get an estimated rate for a loan before you complete a full loan application. This typically involves a short application that sends a soft pull to your credit report.

Checking your own credit score is also considered a soft credit pull. If you currently have a credit card, the issuer may also occasionally perform a soft credit inquiry for account maintenance, which could lead to your card’s credit limit changing.

More Reasons For a Soft Credit Check

Besides underwriting a loan, there are additional reasons for a soft pull to occur:

  • “Pre-qualified” credit cards
  • “Pre-qualified” insurance quotes
  • Employment verifications and background checks
  • Self credit score checks

Remember, soft credit checks will not hurt your credit and are only visible to you when you review your credit report. If someone other than yourself looks at your credit report, they will only see the hard inquiries.

At Earnest, our two-minute Rate Check is always a soft inquiry and never dings your credit. Checking your own credit is always a soft pull, while applying for a loan is often a hard pull. An application for an apartment, signing up with a new internet or cable service provider, or renting a car can lead to either type. Again, if you’re unsure, ask the provider before completing an application.

What is a Hard Check? Hard Inquiries and Their Effect on Your Credit Score

When you’re ready to complete a full application to borrow money—whether that’s for a credit card or loan application—lenders typically make a hard credit report (or hard credit pull) on your credit as part of the underwriting process. This allows your credit report to be reviewed by the financial company.

Regardless of the result of your application, a hard pull typically lowers your credit score by a few points and will remains on your report for two years. If you make too many hard-pull inquiries in a short period of time, it can have a short-lived impact on your credit score. When lenders see several credit applications in a short period of time, they assume that you have poor money managing skills and are unable to pay your debt with your existing income, making you less likely to be able to pay them back.

Do Hard Credit Checks Hurt Your Credit?

According to credit scoring agencies Fair Isaac Corporation (FICO) and VantageScore, which create the most widely used consumer credit scores, hard credit inquiries can have an impact on consumers’ credit scores—but it’s often only a small change and it’s not permanent.

Hard pulls can have the greatest impact on those with only a few credit accounts and the impact may increase the more inquiries you have. However, if you’re shopping to find the best rate for a loan or mortgage, VantageScore considers all inquiries made within a 14-day window as one inquiry when calculating your credit score. FICO considers multiple mortgage, auto, and student loan inquiries made within 14 to 45 days as one inquiry. This one inquiry could incur a small, temporary change on your credit. FICO scores also don’t take into account any mortgage, auto, or student loan inquiries made in the last 30 days.

While hard inquiries remain on your credit report for two years, they only impact your FICO credit score for up to one year. VantageScore states that a credit score will generally be back to its starting point within a few months of a hard inquiry. 

Your FICO is determined by the following factors, with the weighting for each factor in the calculation:

  • Payment History (35%)
  • Credit Utilization (30%)
  • Credit History (15%)
  • New Credit (10%)
  • Credit Mix (10%)

It is important to note that credit card utilization and payment history have a greater impact on a person’s credit score than the other factors listed.

More Reasons For a Hard Credit Check

When else might you encounter a hard credit pull?

How Do I Boost My Credit Score? 4 Tips For Credit Wellness

There are some changes you could make if you see room for improvement in your credit score:

  • If you’re curious about your own credit report, you can get copies of your report through AnnualCreditReport.com, a site endorsed by the federal government to provide you with a free report every year. It’s a good idea to check your credit report on an occasional basis to ensure that all your information is being reported accurately.
  • Create a strategic timeline when applying to loans (sporadically and infrequently)
  • Keep your credit utilization under a maximum threshold
  • Make your payments on time, every month  
Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.