Those who pay close attention to their credit scores may have heard the term "credit pull." Also known as a "credit inquiry," this action is common and can affect your credit score in different ways. See the difference in pull types and why you'll want to keep close tabs on when and how they happen.
What is a hard inquiry?
A hard pull, or hard inquiry, is most often used when a lender or creditor is assessing you for credit risk. They want to know if you're creditworthy, and they can find this out by accessing the details of your credit history or score.
A hard pull can lower your score a little, but the amount of pulls done in a period of time can do even more damage if not spaced out far enough. Hard inquiries generally stay on your credit reports for up to two years, so consider limiting them if you want to keep your score up.
Who does a hard pull?
Since a hard pull is most often used to tell if you're a good lending risk, they are used by an entity considering you for a loan or credit card. Banks, credit unions, and credit card companies rely on hard inquiries to make sound lending decisions. They'll look at the information listed on your report to see if you are likely to pay back the money. These decisions affect all kinds of loans, including mortgages, private student loans, and car loans.
Applying for many loans over time almost definitely brings your score down. Each pull can have an effect, depending on the timing. A flurry of credit pulls over the course of a year, for example, may signal to a bank that you are desperate for money—and not a solid credit risk. Make each pull an intentional action.
If you rent, your landlord can also run a hard pull, but they can sometimes just run a soft pull. The application will often ask permission to do a background or credit check, and they can’t do one without your consent. If you’re not sure which one they will run, ask them.
What is a soft inquiry?
Another type of credit inquiry is a soft inquiry, or soft pull. This gives a lender or service provider access to your credit report with the same details you would see if you asked for one. Things like late payments, loan limits, credit card debt, and any collection actions will all show up.
It’s not the same type of inquiry as a hard pull, so it won’t negatively affect your credit score. It also means that they may not tell you they are doing one. When you sign up to do business with a creditor, however, you’ve given consent for them to do this. For companies you don’t do business with, an “opt-out” is required to keep them from doing soft credit checks.
Who does a soft pull?
Anyone who does business with you may perform soft credit inquiries on your credit to determine if they want to continue serving you. This includes insurance companies as well as employers, who may want proof that you’re responsible and pay your bills on time.
Credit card companies will also make soft inquiries for a few reasons:
- Companies that don’t already do business with you may use inquiries to pre-qualify you and send you relevant offers for new credit.
- Your current issuers may use it to see if you’re eligible for a different rate or a higher credit limit.
Examples of hard and soft inquiries
These are common cases where a hard inquiry may be needed:
- Applying for a new credit card
- Applying for a new loan
- Filling out a job application where you’re asked for your Social Security Number
- Renting an apartment where you’re asked about your credit details
These are common cases of soft inquiries:
- Applying for homeowners or car insurance
- Renting an apartment where you aren’t asked for permission or credit details
- Getting credit card or personal loan offers in the mail without asking for them
- Being notified that your credit card company has raised your limit as a reward for good financial behavior
What is the difference between hard and soft inquiries?
There are two main ways that hard and soft inquiries differ:
- A hard inquiry can affect your credit score and will stay on your report for two years before it eventually ages off your report. A soft inquiry shows up in a separate section of your credit report, but doesn’t affect your score.
- Hard inquiries usually require your explicit permission to run. When you apply for a loan or are asked for your Social Security number on a job application, expect a hard inquiry as a result. Soft inquiries happen all the time, usually without you knowing. If you’re getting mail from a credit card you’ve never done business with, they obtained your contact information and are using a soft inquiry to decide that you’re worth pursuing as a customer.