Debunking Soft Credit Checks Vs. Hard Credit Checks

By Tiffany Wagner

There is a lot of confusion with regards to your credit score and credit inquiries. The soft and hard version? Soft credit check doesn’t affect your credit score, hard inquiries do. The question is, how else do these credit checks differ from one another? 

For a little help, we’ll walk you through the confusion and clear them up. Read on to know more!

What Is a Credit Check?

Directly speaking, a credit check takes place when yourself, an employer, or a potential lender reviews and inspects your credit report. And there are two kinds of credit checks, hard credit pull and soft credit pull.

Both credit inquiries appear on your credit report with information about who checked your data. Even so, there are some significant differences between these credit inquiries. 

Soft Credit Inquiry

This type of credit check refers to any request for credit data from an entity, business, or a group that’s not a potential lender seeking to decide whether you qualify or not for credit. A soft credit check won’t hurt or affect your credit score. 

And according to the Fair Credit Reporting Act, there are rules about who can check your credit report and for what motive. Also, federal law states that any soft credit checks display on your credit report for at least twenty-four months after they are made.

The following are some reasons why a soft inquiry may happen:

When You Are Applying for a Job

A lot of companies conduct a soft inquiry as part of a customary background check. So, if you are applying for a job that involves security clearance or deals with sensitive financial information, then you’ll most probably encounter a credit check.

An employer credit inquiry is aimed to probe for financial issues that could present difficulty and dilemma on the job. Similar to submitting a professional resume, your credit report serves as your financial resume.

But not like pre-screened offers, employers must get your signed consent before they can pull your credit. 

Pre-approved Loan

If lenders want to pre-approve you for a loan or a credit card, then they’ll likely do a soft credit check on your credit report. Lenders usually do this before handing you a prescreened offer for a loan to determine if you are fit or able to apply. 

Take note that getting a pre-approved loan doesn’t mean or signify you’re guaranteed to receive a loan or credit card. It’s because a soft credit check typically does not display as much information compared to a hard credit check. 

If you apply for the promotional offer, the lender will then conduct a hard credit check to confirm your qualifications. 

Checking Your Own Credit

It is undoubtedly wise to inspect and review your credit report regularly to look out for signs of any mishaps that need correction, identity theft, and monitor your credit score. Also, it is a great idea to review your credit before making a big purchase, such as a car or house. In this way, you can build your credit to get better rates or to qualify.

Although you only have one free copy of your credit report from TransUnion, Equifax, and Experian, you can still check your credit as frequently as possible without affecting your credit score.

Hard Credit Inquiry

This type of credit inquiry takes place when you apply for a line of credit. For instance, a personal loan, mortgage, credit card, and so on. Also, hard inquiries usually are more comprehensive than soft credit checks. 

Not like soft inquiries, your consent is needed before hard credit checks can be done. And even though both credit inquiries exhibit on your credit report for twenty-four months, only hard credit checks can affect your credit score. 

Hard credit checks could have a significant effect on your credit score if you have a shorter credit history or have fewer accounts. As such, some experts suggest not applying for new loans during the year, making a massive purchase because you do not want to hurt your credit score before the time you need it most.

Hard credit pulls register for at least ten percent of your FICO credit score. When you apply for multiple loans in a short period, creditors may see you as overly dependent on credit and count you as a higher risk. 

If you don’t know a hard credit check on your credit, better ask first. Verify the name of the lender because sometimes the lender’s name looks different than what you are familiar with. If you don’t recognize it at all, write a letter to the Consumer Financial Protection Bureau to remove the hard inquiry. 

Takeaway

If you are attempting to build and establish your credit, pay attention, and look closely at hard credit checks. This inquiry is a crucial part of the process. Generally, apply carefully to credit and it is wise to take on new debts that you can afford to repay. Also, ensure to review and check your credit report regularly to inspect for other issues and errors. As for repairing your credit, you can simply type: credit repair + the state you live in. For example: credit repair Florida would provide you with all the options from that state.

About the Author

Tiffany Wagner is a blogger and writer. She is very passionate about writing budget travel, smart budgeting, business, and finance. In her free time, Tiffany hangs out with her friends and colleagues.