What Is Soft Credit and How Does It Work?

Lenders and businesses often check credit reports to assess financial responsibility, but not all inquiries impact credit scores. Some checks leave no trace visible to lenders, while others can temporarily lower scores. Understanding these differences is key to managing credit effectively.

Definition of Soft Credit

A soft credit check, or soft inquiry, is a review of a person’s credit report that does not affect their credit score. These occur when a company or individual examines credit information for reasons unrelated to a formal credit application. Unlike hard inquiries, which are triggered by applications for loans or credit cards, soft inquiries often happen without the consumer’s direct request.

Financial institutions frequently use soft inquiries to assess potential customers for pre-approved credit offers. Credit card issuers and lenders check credit reports to determine eligibility before extending invitations to apply. Since these inquiries are not tied to an active credit request, they do not signal new borrowing activity to other lenders.

Consumers also initiate soft inquiries when checking their own credit reports through services like Experian, Equifax, or TransUnion. These reviews help individuals track changes, identify errors, and detect fraud without impacting their credit scores.

Differences Between Soft and Hard Credit Inquiries

When a financial institution reviews a credit report, the type of inquiry determines its impact. Hard inquiries result from applications for new credit, such as mortgages, auto loans, or credit cards. Because they indicate potential new debt, they are recorded on a credit report and can slightly lower a credit score. Multiple hard inquiries in a short period may suggest financial distress.

Soft inquiries, by contrast, do not signal new debt obligations and are not visible to other creditors. These occur when creditworthiness is assessed without a formal application, such as in tenant screenings or employment background checks. Since they do not reflect an attempt to take on new financial responsibilities, they have no impact on credit scores and are only visible to the individual reviewing their own report.

Another difference is consumer consent. Hard inquiries require authorization since they are tied to a credit application, while soft inquiries can happen without direct approval, such as in pre-screened credit offers. This means individuals may have soft inquiries on their reports without realizing it, whereas hard inquiries always result from an action they take.

How Soft Credit Inquiries Affect Credit Scores

Credit scores are determined by factors such as payment history, credit utilization, length of credit history, and recent inquiries. While hard inquiries can lower a score, soft inquiries are excluded from credit scoring calculations because they are not linked to new debt.

Hard inquiries remain on a report for up to two years and can influence lending decisions. Soft inquiries, however, are only visible to the individual reviewing their own credit file and do not affect creditworthiness when lenders assess applications for financial products.

Common Uses of Soft Credit Checks

Businesses and organizations use soft credit checks in various ways beyond lending decisions. Insurance companies review credit-based insurance scores when determining policy rates. While credit scores are not the sole factor in setting premiums, insurers may use them to assess the likelihood of claims. Some states regulate this practice, limiting its use for certain types of coverage.

Landlords use soft credit checks when screening prospective tenants. A review of an applicant’s credit history can reveal patterns of late payments, outstanding debts, or collection accounts, helping property owners assess financial reliability without affecting the applicant’s credit score.

Utility providers and subscription-based services sometimes perform soft inquiries to determine whether a security deposit is required. Telecom companies and electric utilities may review an applicant’s credit profile to assess payment risk. Customers with strong credit histories may qualify for lower or waived deposits, while those with limited credit may need to provide additional financial assurances before activating service.

Types of Soft Credit Inquiries

Soft credit inquiries occur in various situations where financial history is reviewed without a formal credit application.

Pre-Approval Offers

Financial institutions conduct soft inquiries to determine eligibility for pre-approved credit offers. Credit card issuers and lenders review credit reports to identify consumers who meet their lending criteria before extending promotional offers. These offers may include lower interest rates, higher credit limits, or special rewards programs. Since these inquiries are not tied to an active credit request, they do not indicate new borrowing behavior. Consumers can opt out of receiving these offers through the Federal Trade Commission’s OptOutPrescreen.com, which prevents credit bureaus from sharing their information for marketing purposes.

Personal Credit Checks

Individuals can initiate soft inquiries when checking their own credit reports through services like Experian, Equifax, or TransUnion. Many credit monitoring platforms, such as Credit Karma and Chase Credit Journey, provide free access to credit scores and reports without impacting credit history. Regularly reviewing credit information allows consumers to track changes, identify errors, and detect fraud. If inaccuracies are found, individuals can dispute them with credit bureaus under the Fair Credit Reporting Act, which requires agencies to investigate and correct errors within 30 days.

Employment Background Checks

Some employers conduct soft credit checks as part of the hiring process, particularly for positions involving financial responsibility or access to sensitive information. These inquiries help assess an applicant’s financial stability, which may be relevant for roles in banking, accounting, or government agencies. Employers must obtain written consent before accessing credit reports, and job applicants have the right to request a copy of the report used in the decision-making process. Certain states, including California and Illinois, have restrictions on the use of credit checks in employment decisions, limiting them to specific industries or circumstances.

Benefits of Soft Credit Inquiries

Soft inquiries provide financial insights without the drawbacks of hard inquiries. They allow consumers to monitor their credit health without fear of score reductions. Regular access to credit reports helps individuals detect fraudulent activity and address potential issues before they escalate.

Businesses also benefit by assessing potential customers or employees without negatively impacting their credit profiles. Lenders can identify qualified borrowers for pre-approved offers, while employers and landlords can evaluate financial responsibility without discouraging applicants. Since these inquiries do not indicate new borrowing activity, they provide useful information without raising concerns among other creditors.

Limitations of Soft Credit Inquiries

Despite their advantages, soft inquiries have limitations. Lenders cannot rely on them for final credit approval decisions, as they do not provide a complete risk assessment. A full credit check, including a hard inquiry, is required to evaluate an applicant’s debt obligations, payment history, and overall creditworthiness.

Additionally, while soft inquiries help with credit monitoring, they do not influence credit scores or improve financial standing. Consumers looking to build or repair credit must focus on responsible financial habits, such as making timely payments, reducing debt, and maintaining a low credit utilization ratio. Simply checking a credit report regularly does not strengthen a credit profile.

How to Access Your Soft Credit Information

Consumers can review their soft inquiries by obtaining a copy of their credit report from the three major credit bureaus. Under the Fair Credit Reporting Act, individuals are entitled to one free credit report per year from each bureau through AnnualCreditReport.com. Some credit monitoring services also provide access to soft inquiries, allowing users to see which companies have reviewed their credit history.

If unauthorized or suspicious soft inquiries appear on a report, they may indicate potential identity theft or unauthorized access. While these inquiries do not impact credit scores, consumers can contact the credit bureau to request additional details or dispute any inaccuracies. Placing a fraud alert or credit freeze can provide additional protection against unauthorized access to credit information.