Understanding Soft vs. Hard Credit Checks

Your credit score will affect more than your ability to get financed. It will impact where you live, and could affect your employment, as well. Ensuring that your score remains as attractive as possible is essential.

Every time someone checks your credit report, it is registered as either a hard or soft inquiry. While hard inquiries could lower your credit score, soft inquiries won’t affect your score. Knowing the difference between hard and soft credit checks could help maintain and improve your credit score.

Here is what you should know about soft vs. hard credit checks:

Hard Inquiries in a Nutshell

The main thing to know about a hard inquiry vs. a soft inquiry is that the former could result in the reduction of your credit score. Hard inquiries occur when you apply for a loan or credit card, authorizing the lender to check your credit report. Having a single hard inquiry registered in your credit report isn’t cause for major concern, as a single hard inquiry typically takes two years to be removed from your report.

Steer clear of applying for multiple loans or credit cards, however, since doing so would result in multiple hard inquiries, which would have negative impact. This activity may also lead lenders to perceive you as a risky borrower.

 Soft Inquiries in a Nutshell

When learning about a soft vs. hard credit check, it’s important to note that soft inquiries don’t have any impact on credit scores. They will occur whenever a person checks your credit report as part of a background check. For instance, your employer could look at your credit score before hiring you. Credit card companies might also need to assess your report to determine whether you qualify for specific offers. Both cases will be registered as soft inquiries in your credit report.

One notable difference between soft and hard credit checks is that the person checking your report doesn’t necessarily need permission from you for soft checks. Depending on your credit bureau, these inquiries may not be recorded in your report.

Soft vs. Hard Credit Check Examples

Hard and. soft inquiry examples boil down to whether you authorized another party to access your credit report or not. Authorized checks will be registered as hard inquiries, while unauthorized checks will be registered as soft inquiries. 

Companies like cable, internet, and utility providers often have to check your credit report, which often results in a soft inquiry. If you are unsure of how a credit check will be registered on your report, you should ask the credit card issuer, company, or financial institution for clarification. Here are some common hard inquiry vs soft inquiry examples:

Common hard inquiries:

  • Mortgage application
  • Apartment rental application
  • Personal loan application
  • Credit card application
  • Auto loan application
  • Student loan application

Common soft inquiries:

  • Prequalified insurance quotes
  • Prequalified credit card offers
  • Background checks for employment

Disputing Unauthorized Hard Inquiries

 Most credit reports will showcase all your soft vs. hard credit checks and could help you identify unauthorized credit checks. Ideally, this is part of the reason why you should keep assessing your credit report. While inquiry errors might seem minor, they could easily affect your score. The good thing is that you are allowed to get a free copy of your credit report from each of the three credit bureaus per year. 

Note that you are only allowed to dispute hard inquiries you didn’t authorize. The presence of such inquiries could be a sign of identity theft. Dispute such errors with your credit bureau. Contacting the Consumer Financial Protection Bureau could further help protect you.
 

Managing Soft vs. Hard Credit Checks

A man making a payment with their credit card

Soft inquiries typically have no impact on your credit score or ability to access funding. It’s the hard inquiries you should be worried about. 

However, you don’t have to be worried about racking up hard inquiries when shopping for auto loans or mortgages. Since most of them come with the option of getting prequalified, you can enjoy soft inquiries when shopping for loans. This also allows you to know the kind of loan terms you can expect from a lender without going through the entire application process.

Besides, FICO may record multiple loan applications made over a specific window (typically 14 days) for specific loans like mortgages as a single hard inquiry. Some lenders might work with scoring models that allow a larger window, but it’s best to stick to loan shopping within the first 14 days. Other ways to manage your hard inquiries include:

  • Only applying for credit if you truly need it.
  • Working on other areas that could improve your credit score, such as making loan payments early and settling all your bills. With the kind of boost your credit can get from this strategy, you won’t have to worry much about soft vs. hard credit checks.

Your Credit Health is in Your Hands

The most important thing to learn from this hard inquiry vs. soft inquiry breakdown is that the fate of your credit status lies in your hands. With the right steps, you can ensure your credit score is never adversely impaired by hard credit checks. Now that you know the difference between hard and soft credit checks, get to work on your credit.

For more advice on managing your debt with bad credit or to learn about how we work with you even if you have bad credit, feel free to contact Superior Financial Services.

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