Soft credit check: Learn the basics
Whether your goal is improving your credit score or you just want to understand the basics of how credit works, you should understand what a soft inquiry is and why it matters.
What is a soft credit check & how does it work?
A soft inquiry happens when a third party like a lender or a financial institution decides to check your credit score and other credit-related information for promotional purposes.
However, there are instances where consumers can initiate a soft pull, such as when a person checks to see if they are pre-approved for a credit card offer or a personal loan.
In either case, a soft pull lets a lender receive an overview of your credit history and credit file with any of the three credit bureaus — Experian, Equifax, or TransUnion. This overview allows them to gauge whether you are eligible for a specific type of credit or a loan, or whether you qualify for a higher credit limit.
How does a soft credit inquiry affect your credit?
A soft pull or soft inquiry will not impact your credit health or credit score in any way. This makes sense considering lenders can do a soft pull without your permission.
Can you see soft inquiries on your credit report?
If you’re trying to maintain a good credit score with FICO, VantageScore, or other scoring models, you’ll be relieved to know that soft pulls cannot be seen on your credit reports from the three credit reporting agencies. Only you can see them.
Hard inquiries: Learn the basics
The most impactful type of credit inquiry is the hard credit pull, and this is also the type of credit pull that requires permission from a consumer.
Read on to learn the basics of the hard inquiry and why you should strive to minimize these if you can.
What is a hard inquiry & why does it matter?
A hard credit check is triggered any time you apply for credit or take an action that requires a credit check. For example, you will see a hard pull on your credit report if you apply for a credit card or an auto loan, or if you apply for an apartment or a mortgage so you can purchase a home.
In any of these instances, a hard credit check allows the lender to see details on your credit report and your credit score. From there, they are able to use this information to determine your eligibility for credit.
What triggers a hard inquiry on your credit report?
In most cases, you may be well aware a hard inquiry is being used on your credit.
If you decide to apply for an auto loan or with any number of credit card companies, for example, you should know a hard pull is being used to determine your eligibility. The same is true if you apply for a mortgage or fill out an application to rent an apartment.
However, there are some scenarios where a hard pull might catch you by surprise. If you call your credit card issuer and ask for a credit limit increase, for example, they may opt to do a hard pull despite the fact you already have an account.
How many points does a hard inquiry remove from your credit score?
According to myFICO.com, a single hard inquiry will take five points off a person’s FICO score and potentially less than that. The impact of the hard pull is also short-lived and may only last for a short period of a few months.
How long do inquiries stay on your credit?
Hard inquiries stay on your credit report for two years. However, FICO only considers hard pulls for credit scoring purposes for up to 12 months.
How to minimize the number of hard inquiries you have
To minimize the number of hard inquiries on your credit report, you’ll want to avoid applying for new credit unless you absolutely have to.
Remember that a hard pull requires your permission, and you have to initiate it with a creditor or another institution. This means you ultimately have the power to reduce hard inquiries and their impact on your credit score.
Can a hard inquiry be removed?
Hard inquiries cannot be removed from your credit reports, but they will be removed from your credit information on their own after two years.
Examples of hard credit inquiries and soft credit inquiries
Looking for examples of hard pulls vs. soft pulls? Some of the most common credit inquiries in either category are listed below:
Common types of hard inquiries
- Apartment rental applications
- Auto loan applications
- Credit card applications
- Mortgage applications
- Personal loan applications
- Student loan applications
- Personal loan applications
Common types of soft inquiries
How to minimize the effect of hard credit inquiries
While a hard inquiry can have an impact on your credit score, making enough good financial moves can help you maintain good credit regardless. The fact is, new credit only makes up 10% of your FICO score, whereas other factors play a much larger role.
In fact, your payment history makes up the bulk of your credit score at 35%, followed by your credit utilization ratio at 30%. From there, the average length of your credit history makes up 15% of your score and your credit mix makes up another 10%.
All this being said, you can minimize the impact of hard credit inquiries and prove you are creditworthy by paying all your bills on time, keeping debt levels low, using credit responsibly for the long term, and having different types of credit on your profile including installment loans and revolving credit accounts.
How to dispute hard credit inquiries
While you won’t be able to successfully dispute a hard pull that is authentic, you can dispute a hard pull on your credit report that you don’t recognize.
After all, a hard credit check you don’t recognize may be on your credit report due to an error, or it could be a sign that you’ve been a victim of identity theft.
In either case, the Federal Trade Commission (FTC) offers details on steps you can take to dispute incorrect information on your credit file. Generally speaking, these steps include contacting the creditor in question and the credit reporting agencies that report the information and asking for it to be removed.
