LendingTree Academy

Hard vs. soft credit pulls: what’s the difference?

Written by

Jonathan McFadden

Posted

July 9, 2019

Hard and soft pulls on your credit happen when financial institutions or other bigwigs (like your employer) take a look at your credit. But each produces a very different result for your overall credit health. Here’s how.

First, what’s a hard credit pull?

A hard pull — formally known as a hard inquiry — happens when a lender or financial institution checks your credit once you apply for a loan, mortgage or additional line of credit, like a new credit card.

The lender reviews your credit report and uses that information to decide whether to let you borrow money. The inquiry will appear on your credit report (and stay there for two years) and can only happen if you authorize the lender to pull your credit. Side note: A hard inquiry may stay on your credit report for two years, but it won’t affect your credit score for longer than one year .

Multiple hard inquiries in a short amount of time can lower your credit score. Why? They’re a bit like red flags. When credit scoring models detect several new inquiries on your credit report, it indicates your plans to open new accounts. That could increase the likelihood you’ll miss or make late payments because now you have more debt to manage. That could make you appear riskier, which makes the brain trust that calculates your credit score a tad skittish.

But what if I’m rate shopping?

Most credit scoring models do take this into consideration. Let’s say you’re comparing rates for the same kind of financial product, such as a mortgage or auto loan. If the same kind of lenders look at your credit report to offer you rates within a 45-day window, most newer credit scoring models will count that as a single inquiry, instead of multiple. That way, your score doesn’t drop each time you get a quote from a car dealership or mortgage lender.

How much will a hard pull affect my credit score?

It depends. Generally, hard inquiries make a minimal impact on a person’s credit score (like five points or fewer, usually). That’s because inquiries, although important, are not the most significant part of your credit score. Side note No. 2: The most important part of your score is your payment history, so make sure you repay all your debts in full and on time.

Still, a hard inquiry can impact your score in some way; how it does that depends a lot on your credit history. For example, if your average age of credit is 20-plus years, chances are a hard inquiry will barely affect your score, if at all. That’s because you’ve proven to the credit bureaus and scoring models that you can manage credit for a lengthy period of time. If you have a good or excellent score, that shows you’re disciplined, responsible and likely have a habit of repaying your bills on time and keeping your balances low.

But what if you only have a five-year credit history? Inquiries might have a greater impact on your score because you have less to show.

OK, so what about a soft inquiry?

A soft credit pull is a little easier to deal with. It doesn’t affect your credit and can happen without your knowledge.

OK, that sounds pretty nefarious, but you usually don’t know about it because it’s not connected to an application for new loans or credit. Soft credit pulls are cursory reviews of your credit report that don’t hurt your credit score.

If you get a new job and your employer checks your credit, that’s a soft inquiry. If you create a LendingTree account and check your own credit score, that, too, is a soft inquiry. And if you get a bunch of offers in the mail saying you’ve been pre-approved for a better car insurance policy or a dazzling new credit card, that’s a soft inquiry because the lender just viewed your credit highlights to see if you qualified for the offer.

Typically, you’re the only person who can see soft inquiries on your credit report, but there are exceptions. Insurance companies might be able to see inquiries made by other insurance companies, and your creditors may be able to see inquiries made by debt settlement companies you’ve given access to your report.

Got any examples?

Sure do. Check out this list.

Hard credit pulls

  • Applying for a mortgage
  • Applying for a car loan
  • Applying for a new credit card
  • Applying for a student loan
  • Applying for a personal loan
  • Applying to rent an apartment

Soft credit pulls

  • Checking your credit score with LendingTree
  • Getting pre-qualified credit card offers or insurance quotes
  • Getting a background check from an employer

Want to see how hard credit pulls affect your credit score? Download the LendingTree app to get unlimited access to your score and report, whenever you want, wherever you want.

Get it on the App Store or on Google Play.