Does a Soft Credit Check Hurt My Credit?
Demystify credit checks. Understand how various credit inquiries impact your credit score and financial standing for smarter financial decisions.
Credit checks are a common practice used by various entities to assess an individual’s financial reliability. They provide a snapshot of how a person manages their financial obligations. Understanding the different types of credit checks and their impact on a credit score can help consumers navigate financial decisions. This article clarifies the distinctions between soft and hard credit checks.
What is a Soft Credit Check?
A soft credit check, often called a “soft pull” or “soft inquiry,” occurs when a person or company reviews your credit report for informational purposes without you applying for new credit. These inquiries are not related to a specific credit application. Soft credit checks do not affect your credit score because they are not visible to other lenders and are not factored into credit scoring models.
Soft inquiries happen in several common situations. For instance, when you check your own credit score or credit report, it registers as a soft inquiry. Lenders may also perform a soft check when pre-approving you for credit cards or loan offers, often seen in promotional mailings. An existing lender might conduct a soft review of your account for management purposes, such as evaluating eligibility for a credit limit increase or other account adjustments.
Employers commonly use soft credit checks as part of background screenings, with your permission, to assess financial responsibility. Insurance companies may also perform a soft pull to determine eligibility or pricing for policy quotes. Some landlords may also use soft checks for rental applications to gauge financial trustworthiness.
What is a Hard Credit Check?
A hard credit check, known as a “hard pull” or “hard inquiry,” occurs when a lender accesses your full credit report as part of a decision to extend new credit. This type of inquiry happens after you have formally applied for a loan, mortgage, or a new credit card. Unlike soft checks, hard inquiries can temporarily affect your credit score.
When a hard inquiry is made, it can cause a small, temporary dip in your credit score, usually by a few points. These inquiries remain on your credit report for up to two years, although their impact on your credit score diminishes after 12 months. Multiple hard inquiries within a short period, particularly for different types of credit, can signal higher risk to lenders, potentially affecting your perceived creditworthiness.
Examples of situations that trigger a hard credit check include applying for a new credit card, seeking a mortgage, or applying for an auto loan. Personal loans and student loans also involve a hard inquiry. Opening a new utility account may also result in a hard check. Credit scoring models treat multiple inquiries for certain types of loans, like mortgages or auto loans, within a specific shopping period (14 to 45 days) as a single inquiry to mitigate the score impact.