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Hard credit inquiries happen when you apply for a loan or credit card, while soft credit inquiries typically happen when you — or your employer or landlord — check and verify your credit.
Understanding how hard and soft credit checks work, when they may be used, and how they can affect your credit will help you make the best decisions for your financial situation.
In this post:
- Soft credit check
- Hard credit check
- Soft credit check vs. hard credit chec
- Check your credit report
- Credit inquiries with poor credit
Soft credit check
A soft credit check is sometimes referred to as a soft pull or soft inquiry. Soft credit checks don’t always require your approval and can happen at any time.
A soft credit inquiry can happen when:
- A company you’ve applied for a job with does a background check on you.
- You apply for an apartment.
- You check your credit score.
- You use Credible to compare rates.
Even if a soft credit pull ends up on your credit report, it won’t cause your credit score to drop as a result of the inquiry.
Checking your own credit score is considered a soft inquiry and will have no effect on your credit score. You can check your credit score and credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year. Until the end of 2023, AnnualCreditReport.com will allow you to get a free copy of your credit report from each of the credit bureaus every week.
Learn More: How to Build Credit
Hard credit check
A hard credit check, also known as a hard credit pull or hard inquiry, does impact your credit. It occurs when you’ve given a person or company permission to check your credit. You’re giving a lender permission to check your credit to determine whether you should be approved and your possible terms and interest rate.
Though hard credit checks can lower your credit score, the effect depends on what your overall credit score was to begin with. Someone with a good credit score who has a few hard credit inquiries in a short period of time will experience less of an impact on their credit score than a borrower with poor credit who has several hard inquiries.
While your credit score might drop from one hard inquiry, it usually rebounds after a couple of months. Expect a FICO score drop of anywhere from one to five points after a hard inquiry. Even after your score rebounds, hard inquiries can stay on your credit report for two years.
Even though it’s a small percentage of what makes up your credit report, too many hard inquiries can tell lenders you’re a credit risk — which means you might be denied credit in the future.
However, you’ll always know when to expect a hard credit inquiry. Some of the most common reasons for a hard credit pull include:
- You apply for private student loans.
- You apply to take out a mortgage.
- You apply for a personal loan.
- You apply to refinance your student loans.
Minimizing the effect of a hard credit inquiry
Though hard credit pulls can negatively impact your credit score, there are things you can do to minimize the effects.
The first strategy is to space out any loan applications you may have. For example, if you know that you will be financing a car and applying for a mortgage in the next 12 months, plan ahead for when you’ll start each process so they don’t overlap.
Fortunately, when you submit many applications for the same loan type within 14 to 45 days, they tend to count as one hard inquiry, thanks to new rules from FICO and VantageScore.
For instance, if you’re buying a home or applying for a large personal loan, you may submit many different applications. VantageScore treats all hard inquiries that happen within a 14-day period as one inquiry. And FICO generally looks at applications completed within 45 days as a single hard credit inquiry.
When it comes to hard credit inquiries, it’s smart to plan ahead. Spread out applications for different types of loans if possible, and aim to submit fewer applications for the same type of loan.
Soft credit check vs. hard credit check
Here’s a quick overview of what counts as a hard or soft credit check:
| Hard credit check | Soft credit check | |
|---|---|---|
| Background check for a new job | No | Yes |
| Pre-qualified credit card offers | No | Yes |
| Using Credible to compare rates | No | Yes |
| Applying for a new apartment | Yes | Yes |
| Private student loan or PLUS Loan application | Yes | No |
| Mortgage application | Yes | No |
| Applying for a personal loan | Yes | No |
| Auto loan application | Yes | No |
| Applying for a credit card | Yes | No |
Lenders, banks, and other organizations use a hard credit pull to decide whether or not to offer you a financial product such as a loan or credit card, and at what rate and terms. A company can’t perform a hard credit check without your consent — companies only perform the hard credit check in response to an application. This also means that any cosigners who apply for a loan with you will have a hard credit check, too.
Soft credit checks, on the other hand, can be performed without your knowledge. These credit checks are often completed as part of a general background check. For example, when you get an offer in the mail for a prequalified credit card, it’s because the lender used a soft credit check to look at your credit history and determine that you were potentially worth lending to.
Check your credit report
Remember, until the end of 2023, you can request a free copy of your credit report every week from AnnualCreditReport.com. When you look over your report, you’ll be able to see if any hard credit checks occurred recently.
When reviewing your credit report, check to see if there are any errors or credit inquiries you didn’t authorize. These could be a sign of identity theft. You can dispute credit errors with the individual credit bureaus.
If you find any inquiries on your report that you didn’t authorize, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB) about a financial product or service that used your information without your permission.
Keep Reading: How to Improve Your Credit Score
Credit inquiries with poor credit
If you have poor credit or no credit history, applying for a loan may seem like a nonstarter. The hard credit inquiry will lower your already-poor credit score, and you may worry that you can’t qualify for a loan anyway. Though this double whammy may seem like an impossible situation, there are several options available to borrowers with poor credit who are worried about what a hard credit pull will do to their score:
Apply with a cosigner. If you’re unable to qualify for a loan based on your own credit history, applying with a cosigner who has a good credit score can help. Their score can also help you qualify for a loan with better terms, and as long as you make on-time payments, you may be able to raise your credit score. Keep in mind that you and your cosigner will be responsible for repaying the loan — if you’re unable to make payments, your cosigner must pay off the loan. Be cautious when asking someone to be your cosigner, since you could damage the relationship if you can’t make your loan payments.
- Find a lender who specializes in bad-credit loans. A number of lenders offer loans to borrowers with poor credit or no credit history. These lenders may focus on other criteria like your education or employment history. Though you can expect to pay a higher interest rate for these loans, you may be able to build your credit if you qualify and make on-time payments.
- Improve your credit score first. Working to raise your credit score can help you withstand a hard credit inquiry or two. The best way to improve your credit score is by paying all your bills on time and paying down your balances on revolving credit accounts. Working on this consistently can help you get a higher credit score and access more loans with better rates and terms.
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Dori Zinn has contributed to the reporting of this article.
