Soft vs. Hard Credit Checks

As you look into building a future, one thing is for certain, your credit score matters. In fact, your overall financial health matters when it comes to securing a positive outlook for you and your family. That’s why it’s important to understand the difference between soft vs. hard credit checks when considering large purchases.

There are a couple of main factors that can influence your credit score, like how much open credit you have vs. how much of that open credit you’re actively using. The length of your credit history and whether you have any negative impacts showing on your credit reports are also considerations that should be taken when thinking about your credit score.

Credit checks are a serious matter, and it’s important that you understand the differences between a soft vs. hard credit check as you make decisions about your credit now and in the future.

Here’s a rundown of soft vs. hard credit checks:

Soft Credit Checks: 

A soft credit check might be referred to in a variety of terms. You may have heard it called a “soft inquiry” or a “soft pull.” Examples of soft credit checks could be a creditor pulling your credit proactively to see if you qualify for any of their current offers or a prospective employer may also run this type of credit check prior to hiring you.

A soft credit check can also help you obtain a loan pre-approval to finance your desired purchase. In this type of transaction, you will have a “yes” or “no” answer right away, and if pre-approved, you’ll likely have a range of interest rates to consider that take into account your current credit rating.

Does a soft credit check affect my credit score?

Soft credit checks do no harm to your credit score and can be used for informational purposes to help you decide on whether or not to proceed with an application based on the financing opportunity that is presented. It proactively puts you in the driver’s seat.

Another common use case for a soft credit check is when a borrower wants to see where their own credit stands. Consumers might use a variety of websites and tools to run a credit check on themselves and learn about their credit. Pulling your own credit is a great way to get informed about your financial health. Plus, this type of inquiry does not affect your credit score.

Hard Credit Checks:

Typically, when you decide to progress from a pre-approval to obtaining a final approval from a lender by taking another step in the process, you are moving from a soft credit check to a hard credit check.

A hard credit check typically occurs when a lender or card issuer checks your credit to make a credit decision on whether or not to approve your financing request. Hard credit checks are most commonly used for mortgage loans, personal loans, or credit cards and will not happen without your authorization.

During the approval process, a hard credit check is typically required, but be cognizant about the number of hard credit checks you’re allowing because each hard credit check can ding your credit score over time.

How do you know when you have too many hard credit checks?

You’ll also want to be careful about how many hard credit checks you have within a short amount of time because these can be concerning to lenders as each inquiry has the potential to open a new account. This could lead to the assumption that you’re having trouble paying bills or are at risk of spending more than you can reasonably afford. Although temporary, hard credit checks can negatively impact your credit score.

While hard credit checks can inevitably impact your credit score, your overall credit health plays an important role in how much your credit is impacted by these checks. Generally, adding a hard credit check or two may lower your score slightly, but it’s unlikely that it will carry a significant long-term impact.

Here are some quick tips for managing credit checks and your credit score:

  • Limit your credit applications for large purchases or for situations when you really need financing
  • Check your credit report regularly to track hard credit checks and to watch for any fraudulent activity
  • Manage other credit score factors such as payment history, types of accounts, and credit availability ratios
  • Pay your bills in a timely manner and your debt quickly to maintain in good standing

Looking for a loan?

LendingUSA offers a pre-approval decision in seconds with a soft credit inquiry. Find out if you’re pre-approved and start financing the important moments in your life.

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