Soft Pull vs Hard Pull – Simple Breakdown

Typically, once you submit an application for credit or to establish a new account with a company, they will examine your credit history. There are two ways in which a company can access your credit information: through either a “soft inquiry” or a “hard inquiry”. While both types of inquiries allow a company to review your credit report, each type of inquiry is processed differently by the credit reporting agency and has different effects on your credit score.

Once you understand the differences between a “soft pull” and a “hard pull”, you will be able to make better choices regarding your credit and take steps to protect your credit rating. If you want options that avoid a hard inquiry, see our page on no credit check loans.

What is a soft pull?

A soft pull of your credit is a cursory view of your credit; essentially, a glance at the outside of the envelope or a peek at the cover of the book. Soft pulls do not affect your credit rating. Most commonly, companies perform a soft pull to give you an idea if you qualify for certain types of financing or to send you promotional offers based on your qualifications (such as home equity loans) or to simply verify who you are.

A soft pull of your credit occurs when you check your own credit, an employer performs a background screening, or a lender sends you a prequalification letter with a general range of what they feel you would qualify for.

What is a hard pull?

A hard pull on your credit history is the same as a full credit inquiry (when lenders look at your entire credit history) to evaluate how much they should lend to you; when you apply for items such as a car loan, a credit card, a home mortgage, etc., a hard pull can result in a temporary reduction of your credit standing. The impact of one single pull will be minor; however, many pulls within a short period of time can have an additional cumulative negative effect on your FICO score.

Why does this matter?

The interest rate at which you borrow money is directly affected by your credit history. Each point in your score can affect your interest rate. Stacking multiple hard pulls for loan offers you did not accept can ultimately lead to a higher interest rate than if you had used soft pulls to research different options and then applied for the loan with the best terms. Using soft pulls to explore options lets you research without negatively affecting your credit score.

Key differences at a glance

• The effect on score: A soft inquiry will never negatively affect your FICO score.
• When it happens: A soft inquiry is done in conjunction with pre-qualifying, checking your credit, etc. A hard inquiry is conducted when you are going through the process of getting approved for a loan, etc.
• Permission: Soft inquiries are typically done by giving blanket permission (i.e., to allow the lender to check your credit report). Hard inquiries require your explicit permission to be run on your credit report in order to complete an application.
• Who sees it: Soft inquiries may appear on your credit report; however, most people cannot view them. Hard inquiries will remain on your credit report for a specified amount of time and will also be available to all other lenders who inquire about your credit history.
• How long it lasts: The effects of a hard inquiry are temporary; they fade after several months based on how well you manage your credit.

A quick story

Let’s say you are looking to get a new cell phone service with financing options. The carrier will perform a soft inquiry to determine whether you qualify for a plan. Your FICO score won’t be affected. Later, when you decide to finance a car and apply for a loan, the lending institution performs a hard inquiry to determine your interest rate. Your FICO score will likely dip slightly, then recover once you begin making timely payments.

How to use soft pulls the smart way

Soft pulls are a great way to test the waters before making a hard commitment. Soft pulls allow you to see how much money you can borrow at what rate, without damaging your credit profile. You can use this information to make sure that the interest rates you’re seeing are competitive. Then, if everything seems reasonable, you can apply for the loan formally, which will trigger a hard pull.

How to minimize hard pull effects

Apply for all of your loans in a short time frame. If you need to get multiple loans for the same thing (i.e., you need to buy a car), try to get all of them in a short amount of time. This way, they’ll be treated as one event by your credit model. After you open an account and get a loan, make your payments on time. Timely payments help your credit score recover faster.

Common questions

Will checking my own credit report adversely affect my credit report?

Checking your credit report yourself is a “soft pull.” This action will not negatively affect your credit score.

Can a lender approve me using only a “soft pull?”

Yes, some lenders may perform a “soft pull” to pre-approve you for potential financing and give you an idea of the interest rate and other terms you might qualify for. However, most lenders will require a “hard pull” before finalizing your loan or credit application.

How much can a “hard pull” reduce my credit score?

You should dispute the unauthorized hard pull by contacting the credit reporting agency, as well as contacting the organization that made the inquiry. In addition, you can place a fraud alert and credit freeze on your account to prevent future unauthorized inquiries.

Simple checklist before you apply

1. Start by getting prequalified. Look for the term “soft credit checks” in that process.
2. Review your credit card application carefully. Note how much you will be paying each month, the length of time you have to repay the loan, any fees, and the total cost of the loan.
3. Find out if there are going to be additional hard pulls before proceeding to the next step in the process. Obtain this information in writing from the lender, or obtain a copy of the disclosures.
4. Only apply for the loan when the numbers fit within your monthly budget.
5. Once approved, continue making timely payments on your loan obligation. By doing so, you may see improvements in your credit rating over time.

If your credit is already low

If your score is low and you still need to borrow, compare terms on our loans for bad credit page before you apply. See how lenders may consider income and bank activity in addition to your score.

Bottom line

Soft pulls allow you to shop around for financing without negatively affecting your credit score, while hard pulls allow the lender to complete their analysis and impact your credit standing (negatively) for a short period of time. Use soft pulls to compare financing options. Only use hard pulls when you are prepared to proceed. Adopting this approach will keep all of your options open and help you maintain healthy credit.

References

https://www.experian.com/blogs/ask-experian/hard-inquiry-vs-soft-inquiry/