Soft vs. Hard Credit Inquiry: What’s the Difference?
There are two types of credit inquiries: soft and hard inquiries. In this article, we’ll look at the difference between the two.
Soft Credit Inquiry
A soft credit inquiry or soft pull is when you or a third party checks your credit report or credit score.
There’s a misconception that checking your credit report or credit score lowers your credit score. That’s false. Checking your credit score will never hurt it. This holds true whether you check your credit score through the credit bureaus Equifax and TransUnion or through a third-party website that lets you check your credit report and credit score online for free.
A second common example of a soft inquiry is when you’re pre-approved for a special offer, such as a credit card or line of credit. The lender more than likely does a soft credit check when this happens. The soft credit check allows the lender to confirm basic credit information about you without diving deeper.
A third example is if you’re applying for a job and your new employer wants to do a background check. Again, this shouldn’t impact your credit at all. While you can see soft credit checks, no one else can. As such, you don’t need to worry about your employer or other lenders being able to see them on your credit report.
Hard Credit Inquiry
A hard credit inquiry or hard pull is when a lender checks your credit report or credit score when deciding whether to approve a credit application for you. Hard inquiries affect your credit score. As such, lenders need to get your permission before doing one.
A hard inquiry gives the lender an in-depth overview of your credit. Lenders typically make hard inquiries when applying for a credit card, personal loan, car loan, mortgage or even a cell phone plan.
A lender uses the information it gathers from your credit report and credit score to determine whether it will lend to you.
Unlike soft inquiries, a record of all hard inquiries will stay on your credit report. Other lenders will be able to see any hard inquiries made on your credit report from the last three years. If a lender sees too many credit inquiries within a short period, it could be flagged unless there’s a valid explanation.
If you’re applying for a mortgage, it’s expected that you’ll see several credit inquiries within a short time plan. These inquiries will show as separate inquiries but should only count as one inquiry for credit scoring purposes, as Equifax and TransUnion expect you to look into several options when applying for a mortgage.
However, when it comes to other credit products, such as credit cards and personal loans, each hard inquiry will affect your credit score, so you want to try to limit them.
The Bottom Line
Do you have any more credit related questions? Reach out to our mortgage experts today. We’d be happy to answer any questions you might have.