A hard inquiry, also called a hard pull or hard credit check, happens when a lender looks at your credit report in detail after you apply for a Loan or Credit Card. This inquiry is typically done with your permission and gets documented in your credit report. Multiple Hard credit inquiries within 30 days can slightly lower your credit score.
A soft credit check, also known as a soft inquiry or soft pull, allows someone to access your credit report without affecting your credit score. This can be initiated by you or a company, even if you haven't applied for credit.
Here are the two main reasons soft checks are used:
- Pre-approved credit offers: Credit card companies and lenders might use soft inquiries to see if you qualify for pre-approved offers. This helps them target customers more likely to be interested.
- Background checks: Employers or landlords may perform soft checks as part of a background screening process.
Since soft inquiries aren't tied to specific credit applications, they don't impact the numerical score that reflects your creditworthiness to lenders (your credit score).
Hard Credit Check
Hard inquiries can cause a temporary dip in your credit score, but usually by a small amount. A single hard inquiry typically brings your score down by a few points, often less than five. The negative effect of a hard credit check on your score generally only lasts for about a year.
However, if you have many hard inquiries within a short period (like a few months), it can raise a red flag for lenders. This might suggest you're applying for a lot of credit at once, which could be seen as a higher risk.
In a nutshell, Hard Credit Checks are a normal part of applying for new lines of credit. But by keeping the number of inquiries in check, you can minimize the impact on your credit score.
Soft Credit Check
The good news is that soft inquiries do not affect your credit score in any way.
Soft inquiries are different from hard inquiries because they are not tied to specific applications for credit. This means they don't signal to lenders that you're actively seeking new credit lines, which can sometimes be a concern.
So, feel free to check your credit report regularly (which counts as a soft inquiry) or receive pre-approved credit offers without worrying about these actions lowering your credit score.
Soft Pulls vs Hard Pulls
Hard checks, done by lenders when you apply for credit, give them a detailed look at your credit history. This helps them decide if you qualify for a loan and at what interest rate. The downside? Hard checks can cause a temporary dip in your credit score, usually lasting around a year. Multiple hard checks in a short period can have a bigger impact, and they stay on your report for up to two years.
Soft checks, on the other hand, are much less significant. These can be initiated by you or a company, even if you haven't applied for credit. Examples include checking your own credit report or getting pre-approved credit offers. Soft checks provide a quick overview of your credit history, but don't affect your score and don't show up on your report.
In short, hard checks are like major exams that lenders use to assess your creditworthiness, potentially affecting your score. Soft checks are more like pop quizzes; they offer a quick glimpse without impacting your score. Understanding this difference can help you manage your credit health effectively.