Credit Score
Knowledge is power in the realm of credit, and a cornerstone of financial literacy is understanding the difference between a soft vs. hard credit check on your credit report. Credit checks, also known as pulls or inquiries, can significantly affect your financial well-being if you’re not careful—so with that in mind, let’s dive in.
Soft Pull vs Hard Pull: The Basics
The main difference between a soft pull and a hard pull of your credit is the potential impact on your credit score. Soft credit checks are gentle and leave no mark, while a hard inquiry could impact your score.
Soft Credit Check: A Peek into Your Credit Health
A soft credit check, or a soft pull, is only visible to you. They have no effect on your creditworthiness from a lender’s perspective.
Types of Soft Credit Checks
There are two main types of soft credit checks:
- Marketing pre-screen credit checks: Often used by companies to pre-approve you for their products.
- Consumer-initiated inquiries: Used when you check your credit score through bureaus like Equifax, Experian, and Transunion or when you opt-in to “check your rate” or “see if you pre-qualify.”
Typical triggers for soft credit checks include employment verification, background checks, insurance quotes, and promotional mail-in offers.
Pro tip: If you’re unfamiliar with any company names you see on your credit report, it could be due to the marketing pre-screen credit checks companies use to pre-approve you for an offer.
Hard Credit Inquiry: A Deeper Dive
A hard credit inquiry, or a hard pull, is typically triggered when you apply for a line of credit or loan. Lenders use hard inquiries to determine if you qualify for their offerings, which can impact your credit score.
Common Hard Inquiry Triggers
Common triggers for hard credit inquiries include applying for a mortgage, credit card, or personal loan (as well as student, business, and auto loans). Keep in mind multiple hard inquiries within a short period can significantly impact your credit score. Lenders may perceive this as a sign of financial difficulties and, as a result, may consider you a high-risk customer.
How Long Does Hard Inquiry Stay on Your Credit Report?
A hard inquiry can typically stay on your credit report for about 2 years. Fortunately, the impact it has on your credit score lessens over time.
Keeping Track of Your Credit Inquiries
It’s a good idea to check your credit report at least once a year. Equifax, Experian, and Transunion offer free consumer credit reports weekly, allowing you to dispute any inaccuracies in the inquiries listed.
The Bottom Line: Soft vs. Hard Credit Checks
Navigating the world of credit can be challenging. But with the right knowledge, maintaining a healthy credit score is achievable. Understanding the difference between a soft vs. hard credit checks is a critical step in that journey. Remember, soft pulls are harmless, while hard pulls could impact your credit score. Regularly monitor your credit report and be mindful of the inquiries made about your creditworthiness.
By doing so, you can take control of your financial health and make informed decisions that drive your financial success.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.