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Hard and Soft Pull Credit Check: Detailed Comparison

Before you apply for any loan, you need to understand what a credit check is and how a request for credit or a request to view your credit score might impact you, your loan application, and your future interest rate and potential loan payments.

A Primer on How Credit Checks Work

A credit check is called an inquiry. When a lender, landlord or employer asks for (or “inquiries” about) your credit report, the reporting agency captures details about the request, and a summary of the request is posted on your credit report. The kind of information includes the name of the lender, the date of the request, and a code that includes the type of inquiry (mortgage, employment screening, account review, or another request).

Credit Bureaus

Every month, your creditors report how you’ve managed your payments, and this information is reflected in your credit report. Credit Reports are maintained by the three credit bureaus:

  • Experian,
  • Equifax,
  • TransUnion.

A credit check is initiated whenever you request credit from a lender or apply for an apartment or job that requires an examination of your credit report.

Credit Check Types

A hard credit inquiry is the result of a request for credit and involves a “pull” of your complete credit report. Hard pulls indicate that you’re seeking credit and evidence of this request for credit will show on your credit report. Hard pulls typically have only a slightly negative impact on your credit score. An example of a hard pull is a credit card application.

Up until recently, signing up for new savings or checking at a bank would not result in the bank doing a hard pull on your credit report, but this is changing.

TIP: If you want to know whether or not your bank will require a hard pull, check the fine print in the agreement when you open an account.

A soft credit inquiry returns information about your borrowing history but does NOT return all the information found in your full credit report: it is merely an overview. A soft pull does not signal that you are actively seeking credit. A soft credit inquiry does not affect your credit score and does not require your permission to take place.

Type of Inquiry Also Called Results From
HARD credit inquiry “Hard pull” A request for credit
SOFT credit inquiry “Soft pull” A request to view your credit, not a request for credit

TIP: Don’t be caught off-guard when applying for that significant loan (typically, you should check your credit report for any errors or omissions at least six months in advance of a significant loan.)

Which Type of Inquiry is Better?

Since a soft credit inquiry does not affect your credit score, it seems to be the better option. But if you are requesting credit, a soft pull will not be enough information for the loan underwriter to assess your borrowing ability.

A hard pull does not have a significant impact on your credit score unless you have many hard pulls in a short period, which could signal an inability to pay current loan payments.

That said, the reporting agencies take multiple inquiries for the same purpose (home mortgage or car loan, for example) in a short period of time and group them into one inquiry session—which is not as harmful as counting each inquiry separately.

What Type of Inquiries are Used by Different Lenders

TIP: Hard credit inquiries that you did not request should be seen as a red flag. A hard pull you did not request could signal an identity thief and should be reported immediately in writing to each of the three reporting agencies.

How Damaging is a Hard Credit Inquiry?

As it turns out, hard credit inquiries actually account for a small percentage of your FICO Score (credit score) overall compared to your payment history or the amount of debt you owe. For most people, one additional credit inquiry takes less than five points off their FICO Scores.

However, multiple hard credit inquiries within a short period of time, especially for different loan purposes typically have a more detrimental effect on your score.

Item Type Time on Credit Report
Soft Credit Inquiries No report impact
Hard Credit Inquiries 24 months
Delinquent Payments 7 years
Defaulted Accounts 7 years
Bankruptcy Discharges 10 years

TIP: You may want to “take the hit” and get all of your hard credit inquiries over within a short time if you won’t be requesting more credit in the near future.

Analyzing the alternatives

You may be wondering what to do if you do not have an extensive credit report, or haven’t used any credit in a long time. FICO® Score XD was developed as an alternative credit score to the FICO credit score, for the millions of U.S. consumers who cannot be scored in more traditional ways due to insufficient or stale data in traditional credit bureau files. This alternative score acts as an “on ramp” to the credit highway, providing a different route to mainstream credit.

Approximately 64 million Americans do not have the more traditional FICO score. Some online lenders, like SOFI, Kabbage and others are able to offer credit outside of the usual, traditional credit models. If you feel you might fall into this category, you might try looking at these and other non-traditional online lenders for your next loan.

Some Things in Life Are Free

You can get a free Experian credit report online from freecreditreport.com (or on the mobile versions here on the App Store or here for Google Play) by merely signing up (and you do not have to give out your credit card info). Two critical benefits come with signup:

  • You can dispute transactions online for free
  • You get free updates about your credit report every time you sign on

TIP: checking your own credit report will NOT impact your credit.

No Credit Check Loans

It is possible to apply for a loan without a credit check of any kind. Some lenders offer a bad credit loan that does not require a hard pull, also called a No Credit Check loan. These loans come with a much higher interest rate and should be thoroughly researched.

Example Costs Amount
Principal Loan Amount $1,000
Finance Fee Rate $20 per $100
Total Finance Charge $200
Loan Duration 4 weeks
Total Repayment Amount $1,200
Effective APR 434%

Payday loans are examples of a no credit check loan. Be sure to watch out for companies that do not offer a customer service number, or don’t ask for basic information like income or ask for collateral, like a car title.

Customer Notice

We strive to provide accurate information regarding personal finance and debt management, but it may not apply to an individual’s situation directly. This content is for informational purposes only and should not be considered as financial advice. PayDayAllDay.com won’t bear any responsibility in relation to personal decisions made based on it. You should consult your financial or tax advisor before making any financial decisions.
References and Sources

1. FICO Score XD. Expanding Credit Opportunities. Fico.Com. Available at http://www.fico.com/en/products/fico-score-xd#overview

2. Free Credit Report: No Credot Card Needed. Experian PLC. Available at https://www.freecreditreport.com/

3. Experian Credit Report & Score on the App Store. Apple Inc. Available at https://itunes.apple.com/us/app/experian-free-credit-report/id1087101090

by Walter Springer

Walter “Wally” Springer has been writing about lending and financial services for over 8 years. He has a couple of e-books on the topics of lending and debt traps. He is an expert on living debt-free because that’s what Wally has been doing for the past 15 years. When Walter Springer writes about debt, you should be reading it. He has been married for 24 years and they have one son in his last year at college. Wally has formal qualifications in Accountancy.