Credit has become a common part of everyday finances. For instance, The Federal Reserve reported that 82% of adults had at least one credit card in 2023. But beyond that, millions of people also have student loans, mortgages, personal loans, and more.
Regardless of what type of credit you want to use, shopping around is a good idea for finding the best terms and rates based on the amount you need to borrow and the timeline you have for paying it back. However, it helps to be cautious about credit checks. Depending on where you are in the process of obtaining financing, the lender may perform a soft credit inquiry, which doesn’t affect your credit score, or a hard credit inquiry, which can cause your score to drop.
Learn about hard vs. soft credit checks, how they work, and what you can do to maintain your credit score as you build up your finances.
What Is a Hard Credit Check?
A hard credit inquiry occurs whenever you apply for a new form of credit, including student loans, personal loans, mortgages, car loans, or credit cards. Also known as hard credit inquiries or hard pulls, hard credit can affect your credit score.
Hard credit inquiries appear on your credit report, and you must consent to a credit check before a lender can perform a hard credit pull.
Types of Hard Credit Checks
A hard credit check generally occurs when you take out a loan or apply for a line of credit, including:
- Personal loan applications
- Private student loan applications
- Credit card applications
- Mortgage applications
- Auto loan applications
- Apartment rental applications
- Student loan refinancing application
If a lender asks for your consent for a credit check, they will likely perform a hard credit inquiry. If your consent isn’t required, the lender will do only a soft credit pull.
What Is a Soft Credit Check?
The other kind of inquiry is a soft credit check, also known as a soft credit inquiry or a soft pull. The main difference between hard and soft credit checks is that a soft credit check doesn’t affect your credit score.
It happens whenever you or someone you authorize checks your credit report. Soft credit inquiries will typically show up on one of your credit reports, but they aren’t used to calculate your score.
Depending on which credit report you’re looking at, not all of your soft credit inquiries may be listed. Soft credit inquiries only show up on the report that was checked. For example, if an identity monitoring service uses your Experian credit report, that inquiry won’t show up on your TransUnion, or Equifax reports.
Types of Soft Credit Checks
Soft credit inquiries aren’t tied to a specific credit application and occur whenever your credit report is viewed by yourself or creditors. For example, these are common types of soft credit inquiries:
- Checking personal credit reports
- Completing a background check
- Prequalified credit card offers
- Checking life insurance quotes
- Getting quotes for private student loans or student loan refinancing
Other situations, such as getting utilities set up under your name or purchasing a new cell phone plan, can result in either soft credit inquiries or hard credit inquiries. Remember, the company must inform you and get your consent for a hard credit inquiry.
Before you refinance your student loans with ELFI, you can get a rate quote without impacting your credit score. This kind of credit check gives you insight into how much you could save by refinancing if you’re searching for the right lender.
How Do Credit Checks Affect Your Credit Score?
Soft credit check vs. hard credit check: what’s the difference? The key factor is how they impact your credit. Soft credit checks have no effect on your credit, but hard credit inquiries do.
According to myFICO, one hard credit inquiry can decrease your score by less than five points. However, those small dips can add up. If you make several inquiries for loans and credit cards within a short window, you could significantly lower your score, making it difficult to qualify for the best rates.
Hard credit inquiries show up on your credit report for up to two years, but credit scoring models like FICO only consider inquiries from the past 12 months to calculate your score. The older an inquiry is, the less impact it has on your credit.
You can minimize the impact on your credit score and maintain good credit by limiting inquiries to a certain window. FICO considers multiple inquiries for the same types of credit — such as mortgage loans — as one inquiry. Depending on which scoring model is used, the window shopping period can be 14 to 45 days.
Disputing Unknown Hard Credit Checks
It’s wise to review your credit reports throughout the year to make sure your information hasn’t been compromised. Unfortunately, identity theft is common. In fact, the Consumer Financial Protection Bureau reported that approximately one in five Americans had errors on their credit reports. You can catch those problems — and protect your credit score — by monitoring your credit reports. You can view your credit reports for free at AnnualCreditReport.com.
Hard credit inquiries always require your consent before they can occur. If you review your credit report and see hard credit inquiries you didn’t authorize, you can dispute them with the credit bureaus online:
The Bottom Line
Now that you know the difference between hard and soft credit checks, you can better protect your credit.
Your credit reports and credit scores play a significant role in your ability to qualify for loans, and they also affect what interest rates you can get. Minimizing the number of hard credit inquiries that occur can prevent unexpected drops in your credit score.
If you’re shopping for a loan and comparing offers from multiple lenders, utilizing prequalification tools that use soft credit checks can be a great way to check what rates are available without submitting a hard credit inquiry. And make sure you only apply for credit when you really need it.
