Decoding Credit Checks: Hard Inquiries vs. Soft Inquiries
In the financial world, credit checks come in two flavors: hard inquiries and soft inquiries. In a nutshell, a hard inquiry can leave traces behind on your credit file, which means it might affect your credit score. A soft inquiry, on the other hand, is an invisible check. Once you dig deeper, you’ll find there’s more to each of these inquiries. Keep scrolling to find out what you need to know about hard and soft credit checks.
What is a Credit Check?
A credit check involves looking at your credit report, which is a list of your past borrowing history with personal loans and lines of credit. The credit bureaus analyze this information to generate a three-digit credit score. You can learn how your credit score is calculated, but this information is not necessary to understand how credit checks work.
There are many reasons why someone might check your report. Depending on who does the check and why will determine whether it’s a hard or soft inquiry.
What is a Soft Inquiry?
Soft inquiries, also known as soft pulls, occur when a person or entity checks your credit report for informational purposes. These checks usually don't impact your credit score.
However, you may see the evidence of these inquiries listed in your consumer disclosure. (A consumer disclosure is a more detailed version of your credit history and can only be accessed by you).
Here are a few examples of soft inquiries:
Personal Credit Checks: When you want to take a look at your own credit report, this check constitutes a soft inquiry. Monitoring your credit regularly is a good idea, as it helps you stay informed about your financial standing.
Pre-Approval Assessments: Have you ever been pre-approved for a credit card? That offer happened because a lender performed a soft inquiry to assess your eligibility. These assessments may happen without your permission.
Employment Inquiry: Sometimes, an employer checks your credit as part of their hiring process. If they do, they will perform a soft inquiry.
What is a Hard Inquiry?
Hard inquiries, also known as hard pulls, commonly occur when you apply for new credit.
Unlike soft inquiries, hard inquiries do affect your credit score. That’s because a hard inquiry becomes an entry in your report, lasting for two years. During that time, it may affect your score by five points or so.
Here are a few examples of hard inquiries:
Credit Card Applications: When you apply for a new credit card, the card company will want to evaluate your creditworthiness. A hard inquiry reveals any potential negative entries in your report, like late payments, to make this assessment.
Loan Applications: Lenders will also perform a hard check any time you apply for a mortgage, personal loan, line of credit, or auto financing. Again, this inquiry gives a lender insight into your previous borrowing behavior to predict how you’ll borrow in the future.
Rental Applications: The rental market is more competitive than ever, and many landlords rely on credit pulls to help them choose a candidate from hundreds of applicants. This inquiry is considered a hard pull, so it will be in your report.
Let’s Recap
A hard pull is connected to a specific application for a loan, credit card, or apartment. It will be recorded in your report and affect your score.
A soft inquiry is unconnected to a loan and works as a background check. Only you can see it, so it won’t affect your overall score.
