Do Secured Credit Cards Do a Hard Pull?

Secured credit cards offer a pathway for individuals to establish or rebuild their credit history. Unlike traditional credit cards, they require a security deposit from the cardholder. This deposit acts as collateral, mitigating risk for the card issuer and making secured cards accessible to those with limited or poor credit. The deposit typically determines the credit limit, though some issuers may offer a higher limit. Responsible use, including timely payments, can positively impact credit scores as activity is reported to major credit bureaus.

Understanding Credit Inquiries

When applying for new credit, lenders often perform a credit check, resulting in either a “hard inquiry” or a “soft inquiry.” A hard inquiry, or hard pull, occurs when a financial institution accesses your credit report to make a lending decision. This typically happens when you apply for a credit card, mortgage, auto loan, or personal loan. Hard inquiries are recorded on your credit report and can temporarily cause a slight dip in your credit score, usually by a few points.

In contrast, a soft inquiry happens when your credit report is checked for purposes other than a new credit application. Examples include checking your own credit score, pre-qualifying for a credit card or loan, or an employer conducting a background check. Soft inquiries do not affect your credit score and are often not visible to other lenders. While both appear on your credit report, only hard inquiries influence your creditworthiness.

Secured Card Applications and Hard Pulls

Applying for most secured credit cards typically results in a hard inquiry on your credit report. Despite the security deposit reducing lender risk, a hard pull is still conducted to verify identity, assess credit behavior, and check for fraud. This process is a standard part of evaluating any new credit application. The hard inquiry provides the issuer with a comprehensive view of your financial history, including payment patterns and existing debt.

Some credit card companies offer a pre-qualification process that might only involve a soft inquiry. This allows prospective applicants to see if they are likely to be approved for a card without affecting their credit score. However, if you proceed with the full application after pre-qualification, the issuer will then perform a hard inquiry. The final application for most secured credit cards will trigger this type of inquiry.

Impact of Hard Pulls and Credit Monitoring

A single hard inquiry has a minor and temporary impact on your credit score, reducing it by less than five points. Its effect diminishes over time; while it remains on your credit report for up to two years, its influence on your score lasts about one year. Multiple hard inquiries in a short period, especially for credit cards, can signal increased risk to lenders and may have a greater impact. However, credit scoring models treat multiple inquiries for specific loans like mortgages or auto loans within a short timeframe (14 to 45 days) as a single inquiry.

Monitoring your credit report regularly is a practical step to observe the impact of hard inquiries and other credit activities. Federal law grants you the right to obtain a free copy of your credit report once every 12 months from each of the three major nationwide credit reporting agencies: Equifax, Experian, and TransUnion. These reports can be accessed through AnnualCreditReport.com, the only website authorized by the federal government for this purpose. Reviewing your credit report allows you to identify any unfamiliar inquiries or potential errors, which can be disputed with the credit bureaus.