Hard vs Soft Credit Check: What They Are, and How They Can Affect Your Credit Score

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hard vs soft credit check

Do you know how to tell the difference between a hard vs. soft credit check?

One impacts your credit score, the other doesn’t. You might know them as a hard pull, soft pull, or as hard or soft inquiries.

Either way, not knowing the difference between them could hurt your chances when it’s time to apply for a loan or a credit card. With only 46% of Americans making more than they spend every month, chances are you’re going to apply for a loan or a credit card just to make ends meet.

Read on to find out the differences between a hard pull and a soft credit pull and how they impact your credit score.

Hard vs. Soft Credit Check:

When you apply for a credit card, a loan, an apartment, or a job, your credit score will be pulled. Employers, landlords, and lenders want to see whether or not you’re creditworthy and see if you’re a responsible person.

When they do a credit pull, it will either be a hard credit check or a soft credit check. A hard credit check is used in the process to approve you for a loan. This will appear on your credit report, showing that you’ve applied for credit.

A soft credit pull doesn’t appear on your credit report. A soft credit pull is used to pre-approve a loan or a credit card. It’s also considered a soft pull when you review your own credit report.

If you were to look at your credit report, you might see credit checks by lenders and credit card companies when you didn’t apply for anything. They’ll look at your credit score and if your score matches one of their credit card or loan products, you’ll get an offer via email or snail mail.

That should explain why you get so much junk mail with credit card offers and emails saying you’ve been pre-approved for an auto loan. You’re being targeted based on your credit score.

The Impact of a Hard Check on Your Credit Score:

This is why you need to know the difference between a hard vs. soft credit check. If you’re applying for an apartment, credit card, or a loan, your credit score will be checked and it will be reported on your credit report.

If you have one credit pull a year, that won’t impact your credit report too much. It may drop a few points and then bounce back up. A hard credit pull can stay on your credit report for about 2 years.

When you apply for an auto loan, personal loan, and a few credit cards within a short time period, it will raise red flags. Applying for a lot of credit is a clear indication that you are in need of cash or you have other financial issues going on.

Since it raises so many red flags of financial issues, your credit score will drop. How much your score will drop will depend on the scoring model. FICO and Vantage Score weigh the impact of hard inquiries in different ways.

You want to make sure that when you’re told that there will be a credit check, you want to ask whether or not it’s a soft credit check or a hard credit check.

How to Shop for a Loan and Minimize the Number of Hard Credit Checks:

When you shop for a loan, you need to minimize the impact of hard credit card inquiries on your credit report. How can you shop for the best loan and interest rate without impacting your credit?

It seems hard to do because lenders won’t make a final offer without a hard credit check, and a hard credit check can drag down your credit score. Use these guidelines when you’re shopping for a loan.

The first thing to do is to get pre-approved for a loan. Getting pre-approved for a loan does a few things for you.

The first is that your credit isn’t impacted. The second is that you have a budget to shop with. The third is that with a pre-approval letter, sellers are likely to take your offer seriously. That can increase your chances to have your offer accepted.

Some credit scoring models recognize that you’re going to shop for a loan to get the best interest rate. They’ll see that you’re applying for the same type of loan in a short period of time, and count it as one credit pull, instead of several separate ones.

The caveat is that not all credit scoring models work this way and they’ll count each credit pull as a hard inquiry on your credit report.

If you do shop for loans, then apply for the same type of loan (auto loan, home loan) in a short time period, usually 14 days. That could minimize the impact on your credit scores.

If you know that your credit isn’t in great shape, you can always opt to apply for a loan that doesn’t have a credit check. You’ll want to follow Bonsai finance advice to find out more about that.

What Really Impacts Your Credit Score?

Since so much of daily life activities relies on you want to be able to take control of your credit score. There are other factors that go into calculating your credit score.

For example, your payment history has a larger impact on your credit score. Your credit utilization ratio has a big impact on your credit score, too.

If these two things are in good shape, you can keep your credit score relatively high despite the hard inquiries.

Hard vs Soft Credit Check: Know the Difference:

It is so important to know the difference between a hard vs soft credit check. Not knowing the difference can raise red flags for lenders, employers, and landlords. That can get you turned down for a home, a job, and a credit card. That can have a huge impact on your life.

While they can impact your score, with a little bit of strategy and planning, you can minimize the impact a hard credit score can have on your credit report.

Want more great lifestyle tips? Check out this article about the top financial mistakes women can avoid.

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