Do Soft Pulls Affect Your Credit Score?

When applying for new credit, such as loans or credit cards, individuals often wonder about the impact on their financial standing. Credit inquiries are records of when a third party has requested to view a person’s credit report. Understanding the different types of credit inquiries and their implications is important for managing financial health, as they help financial institutions assess creditworthiness.

Understanding Credit Inquiries

Credit inquiries are categorized into two main types: soft inquiries and hard inquiries. A soft credit inquiry, also known as a soft pull, occurs when a person or company reviews a credit report without it being tied to a specific application for new credit. This type of inquiry is initiated by the individual checking their own credit score, by existing lenders for account review, or by companies making pre-approved credit offers. Employers or landlords might also conduct soft inquiries as part of a background check.

A hard credit inquiry, or hard pull, takes place when a lender accesses a credit report as part of a formal application for new credit. This occurs when an individual applies for a mortgage, auto loan, personal loan, or a new credit card. Unlike soft inquiries, hard inquiries require the consumer’s explicit authorization before the credit report is accessed. Lenders use hard inquiries to evaluate credit history and payment behavior.

How Inquiries Affect Credit Scores

Soft credit inquiries do not impact credit scores. Major credit scoring models, such as FICO and VantageScore, do not factor soft pulls into their calculations. This is because soft inquiries are not indicative of a new credit application and therefore do not signal increased financial risk to lenders.

In contrast, hard credit inquiries can slightly affect credit scores. A single hard inquiry results in a small, temporary dip, often by less than five points, according to FICO. This impact lessens over time and ceases to influence the score after about 12 months, though the inquiry itself may remain on the credit report for up to two years. When multiple hard inquiries occur for the same type of loan, such as a mortgage or auto loan, within a concentrated period (14 to 45 days), they are treated as a single inquiry by credit scoring models. This practice, known as “rate shopping,” allows consumers to compare loan offers without significantly penalizing their scores for each inquiry.

Credit Report Visibility

Both soft and hard inquiries are recorded on a credit report, but their visibility and implications differ. Hard inquiries are visible to other lenders who access a credit report. These inquiries document a formal application for credit and remain on the credit report for up to two years from the date of the inquiry. This visibility allows potential creditors to see recent attempts to acquire new credit.

Soft inquiries are visible only to the individual checking their own credit report. They are not visible to other lenders or companies. Soft inquiries may remain on a credit report for up to two years, similar to hard inquiries. Their presence on the report does not influence future lending decisions or credit scores, as they are for informational or review purposes rather than new credit applications.