Soft credit checks: Use them to your advantage before a hard credit check
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- 4 min read
- Soft credit checks are like friendly peeks into your credit history that don't affect your credit score.
- Hard credit checks are more thorough and can temporarily lower your credit score, but the impact is usually small and fades over time.
- Soft credit checks are used for pre-approval offers, background checks, and credit score checks.
- Hard credit checks are used when applying for significant loans or credit lines.
- To avoid unnecessary hard credit checks, be selective about when you apply for new credit and complete your rate shopping within a short time frame (usually 14-45 days) to minimize the impact on your credit score.
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Maybe you're searching for a personal loan, a shiny new credit card, or even that mortgage for your dreamy first home. Exciting, right? But here's the thing—as you navigate the financial landscape, you've probably heard about these mysterious creatures called "soft" and "hard" credit checks.
We're going to break down all that jargon into plain, everyday words so you can confidently shop for that loan, credit card, or mortgage.
What is a soft credit check?
So, what exactly is a soft credit check? Think of it as a friendly and harmless peek into your credit history. Unlike a hard credit check, which can noticeably impact your credit score, a soft credit check doesn't leave a mark. It's like someone knocking on your door to say hello without actually entering your home.
A soft inquiry occurs when you or someone you authorize, such as a potential employer, views your credit report. This is also known as a soft credit check or pull. Soft inquiries happen when a company checks your credit to see if they can give you an offer. This can be from a credit card or mortgage company.
The difference between soft and hard credit checks
Let's draw a clear line between soft and hard credit checks.
Imagine you're applying for a personal loan. The lender wants to know if you're eligible, so they might start with a soft credit check to get a quick overview of your credit history. It's like browsing the cover of a book before deciding if you want to read it. Soft checks are just for information and won't hurt your credit score.
On the other hand, a hard credit check is like someone diving deep into the entire book. It's more thorough and typically happens when you apply for significant loans like mortgages or car loans. Hard checks can temporarily lower your credit score, but the impact is usually small and fades over time.
Soft credit check vs Hard credit check
| Key differences | Soft credit check | Hard credit check |
|---|---|---|
| Purpose | Informational, often used for pre-approval or background checks | Used when applying for significant loans or credit lines |
| Impact on Credit | Doesn't affect your credit score | May temporarily lower your credit score (small impact) |
| Examples | Checking your credit score, pre-approval offers | Applying for a mortgage, auto loan, or new credit card |
| Duration on Report | Typically not visible on your credit report | Appears on your credit report for a limited time |
When and why are soft credit checks used?
You might be wondering when and why soft credit checks come into play. They're used in various situations, especially when you're shopping for a credit card, taking out a personal loan or mortgage, or considering debt consolidation.
Picture this: you're exploring your options for a personal loan to consolidate your debts and simplify your financial life.
You may compare offers from various lenders when searching for the perfect loan. Soft credit checks can be helpful in this process. These checks allow lenders to offer personalized loan quotes, interest rates, and terms based on your credit profile. It's similar to trying on different outfits before choosing the one that fits you best. The best part is that these soft checks won't negatively impact your credit score.
Now, imagine receiving a credit card offer in the mail. Before sending you the offer, the credit card service might perform a soft credit check to ensure you meet their basic criteria. It's like a quick check to make sure you're a good fit for their card.
It's common to perform a soft credit check when you want to view your credit score. This type of check won't impact your credit score in any way. It's similar to taking a personal assessment—it's strictly for your own viewing.
In both scenarios, soft credit checks provide valuable information without harming your credit. As you manage your money, remember that soft credit checks can help you decide on loans and keep track of your financial well-being.
What is a "soft pull" and a "hard pull"?
You may have heard the terms "soft pull" and "hard pull" before. A soft pull is the same thing as a soft credit check, which is like a friendly look. Soft pulls have no negative impact on your credit score. On the other hand, a hard pull is the same as a hard credit check, which is like a thorough examination. Hard pulls may temporarily affect your credit score, but they are necessary when applying for credit.
Bills action plan: Use a soft credit check to your advantage.
Remember to use soft credit checks when you need a loan or credit card. They can help you compare options without harming your credit score. Use these checks to your advantage. Gather quotes and evaluate which option is best for your financial goals. This will help you make informed decisions, get better rates, and improve your financial future.
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Pre-qualification won’t impact your credit
Can I check my own credit score without affecting it?
Absolutely. Checking your credit score is a soft credit check, and it won't harm your credit score. It's like checking your email—it's all about staying informed.
Do soft credit checks show up on my credit report?
No, they won't leave a trace on your credit report for others to discover.
How can I avoid unnecessary hard credit checks?
Great question. You can avoid unnecessary hard credit checks by being selective about when you apply for new credit. Only apply when you're sure you want that new credit, like a loan or a credit card.
If you are applying for a particular type of credit, like a home or car loan, it's best to make all your inquiries within a short period, usually 14-45 days. The credit check will only count as one inquiry on your credit score. This safeguards your credit score and allows you to shop for the best rates without significant harm. However, this protection mainly applies to similar types of credit inquiries.
To protect yourself, completing your rate shopping within this time frame is wise to ensure multiple inquiries are combined. This way, you can make informed decisions while minimizing the impact on your credit score.