Hard vs. soft credit check: Which hurts my credit score?
Knowing the difference between a hard and soft credit check can help you fully understand how to protect your credit score.
Contributing Writer at Tally
October 8, 2018
You may have heard your credit score can take a hit when your credit report is “pulled.”
Well, it’s true. Having someone “pull” your credit report can ultimately hurt your financial health, and that can make it harder to secure a loan or line of credit.
But did you know that not all credit “pulls” carry the same consequences? There are actually no consequences at all for one type of credit check.
With so much information swirling around about what’s good or bad, it’s hard to know exactly what that means. Even the words we use to talk about credit reports only add to this confusion: Credit checks, credit inquiries and credit pulls — all these words refer to the same action.
But there is a difference between a “hard” credit check and a “soft” credit check.
Knowing the difference between a hard and soft credit check can help you fully understand how to protect your credit score. Because, let’s be honest: You don’t want a series of bad decisions to hurt your chances of getting your dream home or a new car. And you don’t want to keep yourself away from crucial information.
What’s a hard credit check?
A hard credit check happens when a potential creditor checks your history while they consider extending a line of credit. A major giveaway of a hard credit check is if you’re asked to authorize the action before it’s initiated.
Certain activities usually trigger a hard credit check, including applications for a credit card, mortgage, car loan or student loan.
Here’s a simple way to think about it: It’s called a “hard” check because it’s (relatively) hard on your credit score.
Some key facts about a hard credit check and its effect on your score:
The penalty is typically enforced on your credit score for about two years.
It’s impossible to know how much your credit score will drop after a hard credit check. This is because of the complicated nature of how each person’s finances interact with the credit agencies’ equations for formulating credit scores. But it can be up to five points, depending on the credit-reporting agency.
As a whole, the impact of a hard credit check is far from catastrophic. Several other considerations (payment history, for example) have a much more significant effect.
What’s a soft credit check?
A soft credit check occurs when an individual or company checks your credit history to verify your identity. Some examples are during a background check for employment or education.
Soft credit checks also happen when a credit card company pre-approves you for a card or promotional offer.
Simply put: Soft credit checks don’t affect your credit score.
A soft credit check doesn’t require your authorization before it’s done, which is part of the reason why it doesn’t affect your credit score. Some groups may still request your permission before doing a soft check, though, so it’s always better to ask what kind of check they’re initiating when they do ask.
How can I prevent hard credit checks?
The worst thing you can do is trigger several hard inquiries in a short period of time. One of the most common ways this happens is by applying for multiple credit cards.
By doing that, you essentially make financial institutions think you’re frantically seeking cash. Then, they ding your score for it.
But, when done mindfully, a hard inquiry only slightly lowers your score.
If you truly need the line of credit, don’t feel dissuaded. The occasional hard credit check — and the corresponding penalty — is unavoidable. Financial institutions and the credit-scoring agencies understand this.
Also, if you’re shopping around for a home loan, credit-scoring agencies lump them together and count the multiple hard credit checks as a single pull. So, you’ll only be penalized once.
The overall goal should be to minimize the number of hard credit checks you authorize. But there’s no reason to fret, as long as you are careful. Therefore, a good of rule is to only apply for lines of credit you’ll likely get authorized.
What else should I know about credit checks?
There are some areas of uncertainty about what makes a credit check “hard” or “soft.” For example, some credit checks for potential renters could go either way, it’s mostly straightforward.
Here are a few scenarios to consider:
You’re serious about securing a line of credit, and your request spurs the creditor to check to see if you’re worth it. That’s a hard credit check.
An interested party is checking your history but has no immediate intention of lending or otherwise giving you credit. That’s a soft credit check.
It’s also OK to ask the party executing the credit check to see if its “hard” or “soft.”
Remember, it’s important to check your own credit reports on a regular basis. When you do, it’s a soft credit check. It won’t hurt your score, and it’s the best way to ensure your score is always heading in the right direction. (There are several companies that allow you easy access to your report, and you should take advantage of that service.)
And the sooner you act on a suspected fraud, the sooner you can dispute an unauthorized hard credit inquiry to keep your score as high as possible.
Bottom line: Soft credit checks won't affect your credit score. If someone asks you to authorize a credit check, that’s a good sign it’s a hard credit check. Overall, a hard credit check won’t affect your score too much and is hard to avoid if you’re serious about getting a loan or line of credit.