Soft Vs Hard Credit Pulls: What's The Difference?

A hard credit pull, also known as a hard inquiry, occurs when an individual applies for new credit, such as a loan or credit card, and the creditor or lender pulls their credit file to assess their creditworthiness. These hard inquiries can affect an individual's credit score negatively, although the impact is usually minimal and temporary. On the other hand, a soft credit pull, or soft inquiry, occurs when an individual or company checks one's credit as part of a background check or when an individual checks their own credit report. Unlike hard inquiries, soft inquiries do not affect one's credit score and are not an indicator of greater risk.

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Soft credit checks occur when an individual checks their own credit score

Soft credit checks, also known as soft pulls or soft inquiries, occur when an individual checks their own credit score. This type of credit check does not negatively impact an individual's credit score. Soft credit checks are typically carried out without the individual's formal request or permission. For example, a credit card company may perform a soft credit check to determine if an individual qualifies for a credit card offer. Similarly, employers may conduct soft credit checks as part of their pre-employment screening process.

Soft credit checks are important for individuals to monitor their financial health and identify any errors or unusual hard credit checks. These checks can include viewing credit reports and credit scores from credit bureaus such as Experian, Equifax, and TransUnion. It is recommended that individuals regularly review their credit reports to ensure accuracy and address any discrepancies.

Soft credit checks are also conducted by lenders or credit card companies to assess an individual's creditworthiness without their permission. These soft pulls help determine an individual's eligibility for pre-approvals, promotional offers, or credit limit increases. Unlike hard inquiries, soft inquiries are not connected to a specific application for new credit and are only visible to the individual on their credit report.

While soft credit checks do not impact an individual's credit score, multiple hard inquiries within a short period can significantly impact their score. Hard inquiries occur when an individual formally applies for credit, such as a loan or credit card, and the lender performs a credit check to assess their creditworthiness. Each hard inquiry can lower an individual's credit score by a few points, and multiple inquiries may have a compounding negative effect. Therefore, it is advisable to spread out credit card applications and prioritize soft pulls when possible.

In summary, soft credit checks occur when an individual checks their own credit score or when entities perform credit checks without their formal request. These soft pulls do not impact an individual's credit score and are useful for monitoring financial health and pre-qualifying for credit offers. However, it is important to be mindful of the number of hard inquiries that appear on a credit report, as they can negatively affect creditworthiness.

Soft pulls are also used by lenders to determine preapproval for credit

Soft pulls are an important step when shopping around for credit. They allow you to see what kind of rates, terms, amounts and fees you may receive from a creditor, so you can compare lenders more easily before committing to one.

A soft pull can also occur when a company has preselected or preapproved you for a credit card. This is done to ensure that your credit history is strong enough for you to qualify for the card offer. This type of soft pull will not impact your credit score and is only visible to you on your credit report.

Soft pulls can also be used by employers as part of their pre-employment screening process. This is done to check your credit before offering you a position or providing you with a rate quote. It is important to note that soft pulls by employers will not affect your credit score.

Hard pulls occur when an individual applies for a new loan or credit card

A hard pull, also known as a hard inquiry or hard credit check, occurs when an individual applies for a new loan or credit card. This type of credit inquiry can negatively impact an individual's credit score, causing it to drop slightly. Multiple hard inquiries in a short period could lead lenders and credit card issuers to consider the individual a higher-risk customer, indicating that they may be short on cash or about to take on a lot of debt.

When an individual applies for a loan or credit card, lenders, banks, and creditors will conduct a hard pull to assess their creditworthiness and ensure that lending to them is not too risky. This involves checking the individual's credit reports and credit scores from one or more of the three major credit bureaus: Experian, TransUnion, and Equifax. The lender will use this information to decide whether to grant the loan or credit card and determine the associated interest rate.

It is important to note that hard inquiries require the individual's permission and can remain on their credit report for up to two years. While a single hard pull may only lower the credit score by a few points, multiple hard inquiries within a short time frame can have a more significant impact. This is because lenders and credit-scoring models view multiple credit applications in a short period as a sign of risk.

To avoid too many hard pulls, individuals can consider getting prequalified or preapproved for credit cards or loans. Prequalification and preapproval typically involve soft credit inquiries, which do not impact the credit score. By taking advantage of prequalification offers, individuals can compare lenders and assess their eligibility without affecting their creditworthiness in the eyes of lenders.

In summary, hard pulls occur when an individual applies for a new loan or credit card and can result in a slight decrease in their credit score. Multiple hard inquiries in a short period may further compound the negative effect. Therefore, it is advisable to space out credit card applications and explore options like prequalification to minimize the impact on creditworthiness.

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Hard credit checks can cause a small drop in an individual's credit score

The impact of a hard inquiry on an individual's credit score depends on their overall credit health. Generally, adding one or two hard inquiries to credit reports could lower scores by a few points, but this is unlikely to have a significant impact. However, having many hard inquiries within a short timeframe will likely impact credit scores more substantially. Hard credit checks can remain on a credit report for up to two years, but credit scores often rebound from an inquiry within a few months. According to FICO, one hard inquiry will typically reduce an individual's score by fewer than five points.

Soft credit checks, on the other hand, do not impact an individual's credit score. Soft inquiries occur when a lender checks an individual's credit to gauge whether they are pre-approved for credit. They may also occur when an individual checks their own credit or when entities like insurance companies, medical providers, or prospective employers check an individual's credit before providing a rate quote or hiring them. Soft inquiries are listed on credit reports, but only the individual can see them.

Multiple hard inquiries in a short period could suggest a higher risk to lenders

A hard credit pull or hard inquiry is when a creditor accesses your credit file to assess your creditworthiness and potentially approve you for a credit card, loan, or line of credit. This usually happens when you apply for a loan or credit card, and it can cause your credit score to drop slightly. Multiple hard inquiries in a short period could suggest a higher risk to lenders, and here's why:

Firstly, a hard pull typically occurs when you specifically apply for a new loan or credit card. Lenders, banks, and other creditors will check your credit to ensure that lending to you isn't too risky. This is considered a hard inquiry because it is connected to a specific application for new credit. As a result, it is visible not only to you but also to other lenders when they check your credit.

Secondly, when you have multiple hard inquiries in a short period, lenders may assume that you are seeking to take on a lot of debt. This could lead them to consider you a higher-risk customer. They may believe that you are short on cash or getting ready to accumulate a substantial amount of debt. Consequently, they may view you as more likely to default on your loan or credit card payments.

Thirdly, hard inquiries can remain on your credit report for up to two years. While one or two hard inquiries may lower your credit score by a few points, having many of them within a short time frame will likely have a more significant impact. This is because lenders and credit-scoring models interpret multiple credit applications in a condensed period as a warning sign.

Lastly, while soft inquiries have no impact on your credit score, hard inquiries can lower it. Although a single hard inquiry may only decrease your score by a few points, multiple inquiries can have a compounding negative effect. This can make it more difficult to obtain credit or qualify for loans or credit cards in the future.

In summary, multiple hard inquiries in a short period could suggest a higher risk to lenders because they indicate a potential increase in debt burden, a higher likelihood of default, and a negative impact on your credit score. Lenders consider these factors when assessing your creditworthiness and may adjust their lending decisions accordingly.

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