Lenders, at times, might check your credit using a hard inquiry, also called a hard pull. They will send a note of such an official review into your credit report. Such information informs them of your past behavior with past credits, whether you paid all bills and debts on time and any derogatory concern on your credit report.
Such inquiry also intends to know the entire credit amount you are juggling and the duration of managing your credit. These are factors that creditors look into before deciding whether you deserve an additional credit or extend new credit to you.
One can prepare oneself for a hard credit check by keeping tabs on the credit report and ensuring no surprises. Checking your credit report yourself is called a soft pull or a soft credit inquiry.
This article will explore the features and differences of these two credit checks.
Understanding a Hard Credit Check
A hard credit check, also known as a hard pull or hard inquiry, happens when a financial institution (like a credit card company or a lender) accesses your credit for a credit decision. It is common to apply for a loan, credit card, and mortgage, and one needs to authorize such a check.
A hard pull might bring down your score by a couple of points, and in some cases, the effect might be insignificant. Whatever dent the pull has on your credit score will typically disappear before such inquiry disappears from your credit report for good. Most times, a hard check remains on your report for two years.
While this might not be a cause for concern, it is not a license to apply for a series of credit cards simultaneously or even within a couple of months. When there are a series of hard inquiries within a short time frame, lenders will classify you as high risk. It might imply you are desperate for cash and need to rack up lots of debt. As a result, spread out your credit card application.
Hard Pull: When does it get too much?
The effect of a hard pull on your credit score will also dovetail into your entire credit health. Generally, one or two credit pulls might bring down your score by a couple of points, even though nothing serious.
However, your credit score will suffer if you have many checks within a short time. Lenders and credit scoring models consider a series of credit applications in a short time as a risk. However, car loans, mortgage applications, student loan inquiries are exceptions.
Understanding Soft Pulls
A soft credit check, also known as soft pulls, occurs when someone checks your credit when doing a background check. For instance, it happens when a credit card company checks your credit without informing you if you qualify for some credit card. An employer can also conduct a soft check before hiring.
Soft checks do not impact your credit score like a hard one. Depending on the bureau, the records might not be on your credit report as a hard inquiry.
Hard and Soft Credit Inquiries: Examples
What distinguishes a hard inquiry from a soft one is whether you consent to the check. Checks done due to permission you gave is called a hard inquiry. While checks done without your consent is called a soft inquiry.
This section will consider examples of hard and soft credit pulls that could be placed on your credit report:
Hard Credit Inquiries:
Application for student loan
Application for credit card
Personal loan request
Application for mortgage
Application for an auto loan
Soft Credit examples:
Checking your credit scores
Background checks for employment
Insurance quotes
Bear in mind that a couple of other credit checks might reveal themselves as a soft or hard credit inquiry. Cell phone operators, cable, landlords, internet, etc., will likely check your credit.
If you don’t know the classification of a specific inquiry, request clarification from the financial institution, credit card company, or company itself to shed light on such inquiry.
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