What’s the Difference Between Hard and Soft Credit Checks?March 22, 2022
After putting large-scale expenses like travel on hold during the height of the COVID-19 pandemic, many people are looking forward to making big purchases again. As a result, many people are searching for new forms of credit. In fact, the Wall Street Journal reported that nearly 27% of consumers said they had applied for a credit card in the past 12 months.
But before you start applying for this type of financing, it’s important to understand how credit inquiries can affect your credit score. Every time you apply for a loan or credit card, the lender will perform a hard credit inquiry, which can cause your score to drop. That differs from a soft inquiry, which doesn’t affect your score.
Learn about hard vs. soft credit checks and what you can do to maintain your credit score.
What Is a Hard Credit Check?
A hard credit inquiry occurs whenever you apply for a new form of credit, including student loans, personal loans, mortgages, car loans, or credit cards. Also known as hard credit inquiries or hard pulls, hard credit can affect your credit score.
Hard credit inquiries show up on your credit report, and you have to consent to a credit check before a lender can perform a hard credit pull.
Types of Hard Credit Checks
A hard credit check generally occurs when you take out a loan or apply for a line of credit, including:
- Personal loan applications
- Private student loan applications
- Credit card applications
- Mortgage applications
- Auto loan applications
- Apartment rental applications
- Student loan refinancing application
If a lender asks for your consent for a credit check, they will likely perform a hard credit inquiry. If your consent isn’t required, the lender will do only a soft credit pull.
What Is a Soft Credit Check?
The other kind of inquiry is a soft credit check, also known as a soft credit inquiry or a soft pull. The main difference between hard and soft credit checks is that a soft credit check doesn’t affect your credit score.
It happens whenever you or someone you authorize checks your credit report. Soft credit inquiries will typically show up on one of your credit reports, but they aren’t used to calculate your score.
Depending on which credit report you’re looking at, not all of your soft credit inquiries may be listed. Soft credit inquiries only show up on the report that was checked. For example, if an identity monitoring service uses your Experian credit report, that inquiry won’t show up on your TransUnion, or Equifax reports.
Types of Soft Credit Checks
Soft credit inquiries aren’t tied to a specific credit application and occur whenever your credit report is viewed by yourself or creditors. For example, these are common types of soft credit inquiries:
- Checking personal credit reports
- Completing a background check
- Prequalified credit card offers
- Checking life insurance quotes
- Getting quotes for private student loans or student loan refinancing
Other situations, such as getting utilities set up under your name or purchasing a new cell phone plan, can result in either soft credit inquiries or hard credit inquiries. The company has to inform you and get your consent for a hard credit inquiry to occur.
Before you refinance your student loans with ELFI, you can get a rate quote without impacting your credit score.* This soft credit check gives you insight into how much you could save by refinancing if you’re searching for the right lender.
How Do Credit Checks Affect Your Credit Score?
Soft credit check vs. hard credit check: what’s the difference? The key factor is how they impact your credit. Soft credit checks have no effect on your credit, but hard credit inquiries do.
According to myFICO, one hard credit inquiry can decrease your score by less than five points. However, those small dips can add up. If you make several inquiries for loans and credit cards within a short window, you could significantly lower your score, making it difficult to qualify for the best rates.
Hard credit inquiries show up on your credit report for up to two years, but credit scoring models like FICO only consider inquiries from the past 12 months to calculate your score. The older an inquiry is, the less impact it has on your credit.
You can minimize the impact on your credit score and maintain good credit by limiting inquiries to a certain window. FICO considers multiple inquiries for the same types of credit — such as mortgage loans — as one inquiry. Depending on which scoring model is used, the window shopping period can be 14 to 45 days.
Dispute Unknown Hard Credit Checks
It’s wise to review your credit reports throughout the year to make sure your information hasn’t been compromised. Unfortunately, identity theft is common. In a 2021 Consumer Reports survey, 34% found at least one error on their credit reports. You can catch those problems — and protect your credit score — by monitoring your credit reports. You can view your credit reports for free at AnnualCreditReport.com.
Hard credit inquiries always require your consent before they can occur. If you review your credit report and see hard credit inquiries you didn’t authorize, you can dispute them with the credit bureaus online:
Now that you know the difference between hard and soft credit checks, you can better protect your credit.
Your credit reports and credit scores play a significant role in your ability to qualify for loans, and they also affect what interest rates you can get. Minimizing the number of hard credit inquiries that occur can prevent unexpected drops in your credit score.
If you’re shopping for a loan and comparing offers from multiple lenders, utilizing prequalification tools that use soft credit checks can be a great way to check what rates are available without submitting a hard credit inquiry. And, make sure you only apply for credit when you really need it.