Credit Inquiries: Hard vs. Soft Pulls
Perhaps you already know that there are two types of credit inquiries. But what’s the difference between a hard and soft pull? And how do these two particular credit checks affect your credit score? Keep reading to understand the details about hard and soft inquiries.
Hard pulls negatively affect your credit. But the good news is, they happen with your consent. That’s right. You’ll know the ding is coming because you’ve just applied for a mortgage, auto loan, credit card, etc.
Yes, a hard inquiry hurts your credit score. Usually by a few points. Which may not matter if you have excellent credit. But if you’re borderline and looking to hold onto your buying power, be careful.
After all, your score can tip the scales in your favor when it comes to mortgages or auto loans. Or you can be denied due to multiple hard pulls over a short period of time and a resulting lower score.
Think twice before you jump at deals, signing up for all the store credit cards. Your credit score is a financial report card. If you’re applying for a lot of credit at once, lenders want to know that. And, indeed, they will know it when they review your report. Hard inquiries are reflected on your profile, and creditors can see you as high-risk when there are too many of these hard pulls.
Soft pulls can and do happen without your consent. You’ve gotten credit card offers in your mailbox, right? That’s typically because a credit company has conducted a soft inquiry, and you’re pre-qualified. These soft pulls happen when you mortgage lender does a pre-approval as well.
Your employers may even complete a background check on you. They’ll get a glimpse of your modified credit profile. Sometimes, businesses look to credit history as it could point to reliable, responsible individuals.
One of the most common soft pulls comes when you yourself check your own credit. Read on to hear about a common credit myth!
Common Misconception About Credit Inquiries
It’s incorrect that checking your own credit affects your credit score negatively. So, don’t be afraid to monitor your profile. Soft pulls like this will not cause damage to your report. It’s actually wise of you to keep a check on your financial standing in this way.
How Long Do Hard and Soft Pulls Remain on My Report?
Soft inquiries will show up on your report. But in a majority of cases, only you can see them.
As mentioned above, it’s different with hard pulls. When you buy or lease a car, for instance, you give the dealership permission to perform a hard credit inquiry. These hard pulls reflect on your credit report for two years.
Worried About Too Many Hard Pulls?
Keep them to a minimum. You don’t want to damage your credit score by applying for too many credit cards and loans. Know that you can ask potential lenders whether a hard or soft credit inquiry will be required. They’ll share that information, and you’ll be able to make informed decisions.
Agencies will often understand if you are rate shopping. Say that you’re home loan shopping, for instance. Rating agencies will likely group your hard pulls into a single hard inquiry for your credit report.
Manage Your Credit Wisely
Both hard and soft pulls give insight into your credit profile. Just remember that hard pulls can be hard on your credit score. Keep yourself on track, and keep that buying power intact!