Soft vs. Hard Credit Checks: What are the Differences?

Capital One

Originally published on March 23, 2018

• What happens when you apply for credit?
• When does a credit check affect your score?
• See chart for examples of hard vs. soft credit pulls.

WHAT IS A CREDIT PULL?

If you were ever in the market for a new car, home, or any other relatively large purchase, then you’ve probably heard about credit inquiries. They typically occur when an outside party such as a credit card company, bank, or an employer accesses your credit report. There are two kinds of these checks, also referred to as “credit pulls.” Learn about the differences between hard and soft credit checks below.

WHAT IS A HARD INQUIRY?

A hard inquiry occurs when a lending institution or entity checks your credit to help make a decision on extending a loan or a new line of credit. Hard credit inquiries occur when applying for items such as mortgages, auto loans, or new credit cards. Hard pulls typically result in just a small ding to your credit score, but multiple hard credit checks within a short time frame can potentially add up. For example, if someone applies for several different credit cards at the same time, this may signal to lenders that the applicant is desperate for cash and may have trouble repaying debts.

Fortunately, there are measures in place that help alleviate the impact to credit scores when shopping around for the best auto loan rates. Plus, any hard inquiry will typically require your authorization.

WHAT IS A SOFT INQUIRY?

Soft inquiries take place when a person or a company accesses your credit report as part of a more general background check for purposes other than making specific lending decisions. For example, if you are applying for a new job, the prospective employer may run a soft inquiry on you. Pre-qualifying for a car loan is another example of a soft credit inquiry, since it is not actually a guarantee of being approved for anything. Instead, it should be viewed as an invitation to apply for the car loan.

The chief difference between hard and soft credit checks is that a soft inquiry will not affect your credit score. Another differentiator is that they may be recorded in your credit report, but not always. The determining factor of whether or not a soft inquiry will appear on your report boils down to the specific credit bureau calculating your score.

IMPACT OF SOFT VS. HARD INQUIRY ON THE CREDIT REPORT

The amount of time a soft inquiry vs. hard inquiry remains on your credit report can vary depending on the reporting bureau and the type of credit pull. The duration of the inquiry on the report is also not an automatic indication of how long it will impact your credit score. Most hard inquiries will remain on the report for around two years, however they only negatively impact your score during the first year in many cases.

For example, say you apply for an apartment and receive a hard credit pull from the prospective landlord or property manager. As you continue to apply for more lines of credit elsewhere, requesters could see the hard pull listed on your report for the next two years. However, if you are meticulous about paying your bills on time with financial tools like autopay and keep your overall credit utilization rate low, your score after one year may boomerang back to a healthy state. Since many lenders are most concerned with your overall credit score, the impact of the hard pull to your report after a year of restoring your credit may seem minimal.

Since it is not standard for soft credit pulls to always appear on your credit report (it depends on the reporting bureau), the timeline of how long a soft pull will remain may vary. Even though it may appear on the report, it still does not have any impact on your credit score, which is a key element of how well you may qualify for additional lines of credit. Soft credit pulls are also only visible to you. Therefore, potential lenders won’t be able to keep track of how many soft pulls you acquire at any given timeframe.

EXAMPLES OF SOFT CREDIT PULLS VS HARD CREDIT PULLS

A general guide with more examples of hard and soft credit pulls include but are not limited to: