While your credit score is only three digits, it can impact every facet of your life. From purchasing a car to renting an apartment to finding employment, your credit score may be a determining factor. That's why it's critical to understand how credit works and the factors that can negatively impact it, such as credit inquiries. A credit inquiry is any request by an authorized party to access your credit report and score. Read on to learn more about soft credit inquiries and their implications.
- There are two types of credit inquiries: hard and soft.
- Hard credit inquiries can negatively impact your credit score, while soft inquiries do not.
- Creditors cannot see soft inquiries on your credit report, but you may.
- Soft credit inquiries can provide the same information as a hard credit check.
- You can check your credit score without negatively impacting it.
Types of Credit Inquiries
A credit inquiry refers to a request to access your credit file by a current or potential creditor, lender, landlord, insurance company, employer, government agency, utility company, or other authorized party. Credit inquiries will typically fall into one of two categories:
- Hard credit inquiries
- Soft credit inquiries
What Is a Hard Credit Inquiry?
Hard credit inquiries (also called "hard credit checks" or "hard pulls") occur whenever a lender, credit card issuer, or financial institution retrieves your credit report in the process of making a final lending decision. Typically, hard credit inquiries are required in order to complete a credit application. These inquiries can lower your credit score and may remain on your credit report for about two years.
What Is a Soft Credit Inquiry?
Soft credit inquiries (also called "soft credit checks' ' or "soft pulls' ') often occur whenever an entity retrieves your credit file in the process of performing a background check, pre approval, or prequalification process. Credit card providers and lenders use soft credit inquiries to prequalify borrowers or to determine eligibility for specific offers. Employers may use soft credit inquiries in pre-employment background checks.
How Does a Soft Credit Report Work?
Creditors, utility companies, landlords, and financial institutions use your credit score and history to understand your ability to pay debt and the likelihood to follow through on your commitments. On the other hand, some employers run credit checks to protect their customers and employees by looking for signs of excessive debt or financial mismanagement. While a hard credit inquiry provides this information, it can lower your credit score. Instead, many entities use a soft credit inquiry to gain access to this information without the negative implications. Depending on the situation, a soft credit check can require much less information than a hard credit check. For example, some credit service providers can pull a soft credit inquiry without your social security number or date of birth, which is required for hard credit inquiries. Examples of when a soft inquiry is used include:
- Receiving offers of preapproved credit from an online lender
- Background checks and employment verification
- Personally accessing your credit report
- Applying for insurance or utilities
- Applying for a credit card increase through an existing lender
- Applying for an auto loan pre approval with a lender
Whether an entity uses a hard or soft credit inquiry often falls back to its policy. In either case, you should ask because hard and soft inquiries have different implications.
Do Soft Inquiries Impact Credit Scores?
Soft inquiries do not impact your credit scores, while a hard credit pull may lower your credit score. According to FICO, a hard inquiry can decrease your credit score by around five points. If you have a good credit score, a hard inquiry may cause your score to drop less than that. Afterward, the hard pull can remain on your credit report for up to two years before it drops off. Fortunately, it will usually only impact your score for up to a year, according to Experian.
Do You See Soft Inquiries on Your Credit Report?
Because soft inquiries are not associated with a specific application for credit, they will not be visible to lenders when they pull your credit. However, you may see it when you pull your credit—depending on the entity to perform the soft pull and the credit bureau. For instance, you may see a soft credit inquiry on TransUnion, but not Equifax and Experian.
What Information Is on a Soft Pull Credit Report?
Essentially, soft inquiries provide the same information as hard inquiries, such as:
- Your credit score
- Your lines of credit and loans
- Types of loans, such as unsecured loans
- Hard inquiries
- Payment history
- Age of credit accounts
- Collection agency accounts
- Tax liens
- Public Records
- And more
Can I Check My Credit Score Without Hurting It?
Yes, you can check your credit score without hurting it via a soft inquiry. You can request a free copy of your credit report every 12 months from each credit reporting agency by visiting AnnualCreditReport.com. As a rule of thumb, you should check your credit report at least once a year and regularly monitor it.
Who Looks at Your Credit Report?
Your credit report and credit score are highly confidential information. As such, the public can't see this information. According to the Fair Credit Reporting Act (FCRA), only certain groups can legally access this information, such as:
- Creditors, including student loan providers
- Insurance companies
- Utility providers
- Government agencies
- Collection agencies
- Judgment creditors
- Entities that have court orders
- Entities with written instructions from you
- And other authorized parties
When Are Credit Scores Updated?
Unfortunately, there is no set cadence for how often your credit file is updated. Instead, your credit report is typically updated whenever lenders and creditors provide new information to the credit reporting agencies. While this tends to happen every 45 days or once a month, some lenders may do so more often.
What Does Your Credit Score Say to Lenders?
What does your credit score tell lenders about you? These three digits help creditors and lenders assess the risk associated with lending to you, which dictates loan approval, interest rate, and terms. Your credit score is based on many factors, including:
- Your payment history
- Amounts owed
- Length of credit history
- Credit mix
- New credit
What's the Difference Between a Credit Score and a Credit Report?
While directly related, your credit score and credit report are different. The credit report is a statement that includes information about your payment history, amounts owed, credit mix, new credit, length of credit history, and public records. It's a comprehensive story of history managing debt and credit. Your credit score is a three-digit numerical representation of this information.
What to Do Before a Credit Check?
Understanding what to do before a credit check can help you put the best foot forward and maximize your chances for a favorable outcome. Use the following tips to prevent any surprises:
- Consider using credit prequalification with a lender. Some prequalifications use a soft credit inquiry with no impact on your score. Verify with the lender prior to submitting the application.
- Review your credit report and score regularly to ensure accuracy.
- If you spot errors or fraud, request revisions or contest unauthorized accounts.
- If your credit isn't where you want to be, take proactive steps to improve it.
- Make sure to remove any credit freezes before applying for new credit.
Your credit score and report are fundamental to your financial health and security. As such, you do everything within your power to protect both. Fortunately, understanding the difference between a soft and a hard inquiry is a step toward making more informed decisions and having a more secure financial future.
- Hard vs Soft Inquiries: Different Credit Checks | TransUnion
- Hard Credit Inquiry vs. Soft Credit Inquiry | Credit Karma
- What Is a Soft Inquiry? - Experian
- How Many Points Does an Inquiry Drop Your Credit Score? - Experian
- What’s The Difference Between A Hard And Soft Credit Check? – Forbes Advisor
- What Is a Hard Inquiry? - Experian
- Hard vs. Soft Credit Checks: What to Expect | Capital One
- How Often Do Credit Scores and Reports Update | TransUnion
- What is the difference between a credit report and a credit score? | Consumer Financial Protection Bureau
- Hard Credit Inquiry vs. Soft Credit Inquiry
- Soft Pull Credit: Reports, Checks - iSoftpull
- Who may request my credit report? | Consumer Financial Protection Bureau