What is a Soft vs Hard Credit Check?

A credit check helps someone understand how you manage money and how likely you are to repay what you borrow. When a lender, landlord, or employer checks your credit, they’re usually looking at your credit reports, and sometimes credit scores, to get a sense of your financial reliability. 

There are two main types of credit checks: soft and hard. In this article, we’ll cover what a credit check is, the difference between soft vs hard credit checks, and whether a soft pull affects your credit score. Knowing how each type of credit check works can help you manage your credit score and prepare for applications. 

To help you manage your credit, Arkansas Federal offers Credit IQ, a free tool that sends you alerts when something changes on your credit report and provides monthly updates with personalized tips to help you improve your score. Get started with Credit IQ today to monitor your credit progress with no impact on your credit score.

What is a Soft Credit Check?

A soft credit check, also referred to as a “soft pull” or “soft inquiry,” happens when your credit is reviewed to help make a decision that is unrelated to lending you money. For example, when you check your own credit score or when an employer runs a background check. Because these credit pulls are purely informational and aren’t signaling financial risk for lenders, a soft credit check does not affect your credit score.

Because soft pulls don’t hurt your credit score, they typically don’t require your permission ahead of time and won’t show up on your credit report for third parties (only you can see them). 

What is a Hard Credit Check? 

A hard credit check, also known as a “hard pull” or “hard inquiry,” happens when your credit is being reviewed because you are applying for new credit or debt. Typically, a hard inquiry credit check occurs when a financial institution pulls your credit for a loan, mortgage, or new credit card application. 

The main difference between a hard and soft credit check is that a hard credit check can lower your credit score by a few points. One hard pull on its own is typically not a big deal and is unlikely to impact your credit score enough to affect a lending decision. However, if you have multiple hard inquiries over a short period, it can be viewed negatively. To lenders, it may look like you’re trying to take on a lot of debt quickly, which can be seen as high risk. 

A hard credit check will stay on your credit report for two years, but it will only affect your credit score for 12 months. Since they do impact your credit score, you’ll typically need to give your permission to run the check. 

Soft Credit Pull vs. Hard Credit Pull Examples

Understanding the difference between soft pulls and hard pulls is easier when you know how they are used. Here are a few common examples of how hard credit checks and soft credit checks are used in everyday life.

Soft Inquiry Examples:

• Checking your own credit score/report
• Prequalifying for a credit card or loan
• Background checks (employer, apartment rental)
• Getting insurance rates

Hard Inquiry Examples:

• Applying for new credit cards or lines of credit
• Applying for loans such as mortgages, car loans, personal loans, or student loans
• Requesting a credit increase on an existing credit card

Sometimes, a credit check is a hard or soft pull, depending on the situation. This is common with utilities, cable or internet providers, and cell phone companies. In these cases, you can ask the company before applying if the check will be classified as a hard or soft credit pull, so you know what to expect. 

How Credit Pulls Work with Rate Shopping

Even though multiple hard credit checks can lower your credit score, you won’t be penalized for rate shopping on certain types of loans. For installment loans like mortgages, auto loans, or student loans, credit scoring models treat multiple hard inquiries as a single inquiry, provided they are for the same type of loan, the same amount, and submitted within a specific timeframe. 

The exact amount of time you have to submit your applications together depends on the scoring model. FICO groups inquiries within 14-45 days, depending on the modeling version used, whereas VantageScore uses a rolling 14-day window. Since you won’t know which scoring model a lender will use, it’s best to submit all of your applications within the 14-day window. 

Keep in mind that this applies only to installment loans and not to credit card applications. Even if you submit multiple credit card applications within a 14-day window, they will each count as a hard inquiry. When possible, take advantage of prequalifying credit card offers, as they typically use a soft credit pull. 

Manage Your Credit With Arkansas Federal’s Credit IQ

Knowing the difference between a soft and hard credit check is the key to understanding how credit checks may impact your credit score. Since your credit score impacts everything from the loan offers and interest rates you qualify for to your ability to get approved for a rental, knowing how to manage credit checks is an important part of managing your financial future.
Arkansas Federal makes it easy to manage your credit. With Credit IQ, you can track your score and receive personalized recommendations for how you can improve your credit score. And because Credit IQ uses a soft pull, your credit score won’t be affected. Sign up for Credit IQ online and get started today.