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Your credit report and score provide information that lenders and creditors use to decide whether or not to lend you money. There are two ways potential lenders and creditors check your credit: A hard credit inquiry or a soft credit inquiry.
So what’s the difference between the two? A hard credit inquiry impacts your credit score (usually by a few points), is reported on your credit history, and usually stays there for two years. A soft credit inquiry does not impact your score, but it also remains on your report for two years.
Here’s the lowdown on hard credit inquiries versus soft credit inquiries, and how these may potentially affect your credit score.
- Hard vs. soft credit report checks
- What’s a soft credit inquiry?
- Which one will lenders use?
- How each type of credit check affects your score
- Take your time and do your research
First off, let’s discuss the terminology attached to credit inquiries. Here are some of the most common opposing terms you’ll hear:
- Hard credit inquiry versus soft credit inquiry
- Soft credit pull versus hard credit pull
- Soft credit check versus hard credit check
Essentially a credit inquiry, credit pull and a credit check all refer to when a lender checks your credit report. You may now be wondering what makes a credit pull, check, or inquiry “soft” or “hard.” Let’s take a look.
A hard credit inquiry, pull, or check is what happens when you apply for a credit card, personal loan, mortgage, auto loan or student loan. If you’re looking for a new apartment to rent, a potential landlord may ask to do a hard check of your credit as well.
The potential lender or creditor will request your credit score and your complete credit history from credit bureaus like Equifax, TransUnion and Experian. A credit application more or less gives the okay for the lender to check your credit.
Since this is something that comes from a credit application, the only way a hard credit inquiry can happen without your knowledge is if someone steals your identity and tries to open a new account in your name.
You may not receive a notification when the hard check happens, unless you are actively following your credit report, but it’s safe to assume that a hard credit pull is going to happen when you apply for new credit or a loan.
Because a hard credit check impacts your credit score, it is important to try to avoid getting hit with several hard checks at once in a short period of time. However, multiple applications for the same type of loan (such as a home or auto loan) within a certain period of time are generally counted as a single inquiry.
A soft credit inquiry, pull or check happens for many reasons. For example, if you apply for a pre-approval on a mortgage, a soft check occurs. When you receive a pre-approval letter for a new line of credit that you didn’t ask for, that’s an indicator of a soft pull as well. Additionally, when you check your own credit (and it’s a good idea to periodically do so), it will cause a soft credit inquiry. One of your existing creditors may occasionally perform a soft credit check as well.
A soft credit inquiry, unlike a hard one, can be helpful to you since it’s a way for lenders to see if you are a reliable borrower without you needing to apply for new credit.
Many soft credit pulls occur when lenders reach out to credit reporting bureaus to gather a pool of qualified candidates for something they want to offer, like a pre-approved credit offer. So those credit card offers you get in the mail? Chances are a soft credit pull happened beforehand.
It’s important to note that a credit card offer based on a pre-approval does not mean you’re already approved. You still have to apply for the credit card, after which the lender will do a hard credit pull to decide what to do. Sometimes this results in a modified offer rather than a straight-up approval or denial.
Soft credit checks can also happen when you’re checking your credit score. There are many sites you can use to check your credit score for free – and a soft credit check happens anytime you do that.
Lenders use hard and soft credit inquiries at different times and under different circumstances. They will most commonly do a hard credit check when you apply for credit such as a loan, a credit card, a refinance or a student loan.
On the flip side, lenders do a soft credit check when you either apply for a pre-qualification for a loan or when they reach out to credit reporting bureaus for a batch of pre-approved consumers.
However, you can reach out to lenders yourself to see if you prequalify for credit. When you send out an inquiry like this, lenders will do a soft credit check to see what kind of offer and interest rate you qualify for. For instance, our student loan refinancing partners will do this when you check your rate.
Once you decide what kind of offer you want and actually apply for it, a hard credit pull ensues.
A soft credit inquiry does not affect your credit score. A hard credit inquiry, on the other hand, does affect your credit score. Thankfully, the effect isn’t massive. According to MyFICO, a credit inquiry takes less than five points off your FICO score.
The time to worry about hard credit inquiries is when you trigger a lot of them. After all, each inquiry will add up and those few points could start to hit a higher number than you want.
If you want to avoid a big hit on your credit score, do all of your loan shopping within the span of a couple of weeks and don’t vary the type of loan you’re applying for. If you apply for a car loan, a credit card and a mortgage, your credit score will take the hit for each separate inquiry.
When it comes to shopping for a new credit card or line of credit funds, be prepared. Do your research and use a soft or hard credit inquiry wisely so you can have a realistic idea of how much this new credit is going to cost.
Then, visit your budget to see what you can afford and stick to that amount. That way you don’t blow up your finances and have to worry about inadvertently damaging your credit score in the process.
Maya Dollarhide contributed to this report.
Interested in a personal loan?Here are the top personal loan lenders of 2022!
|Lender||APR Range||Loan Amount|
|5.74% – 20.28%1||$5,000 - $100,000|
|4.37% – 35.99%||$1,000 - $50,000|
|5.94% – 35.97%*||$1,000 - $50,000|
|99.00% – 199.00%2||$500 - $4,000|
|5.99% – 24.99%3||$5,000 - $40,000|
|7.99% – 20.88%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $36,500|
|10.68% – 35.89%6||$1,000 - $40,000|
|9.95% – 35.99%7||$2,000 - $35,000|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
Fixed rates from 5.74% APR to 20.28% APR APR reflect the 0.25% autopay discount and a 0.25% direct deposit discount. SoFi rate ranges are current as of 1/18/22 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
2 Includes AutoPay discount. Important Disclosures for Opploans.
Direct Deposit required for payroll.
Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.
3 Includes AutoPay discount. Important Disclosures for Payoff.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Avant.
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.
Based on the responses from 7,302 customers in a survey of 140,258 newly funded customers, conducted from August 1, 2018 – August 1, 2019, 95.11% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.