Pulling your credit report: What is a Soft vs. a Hard Credit Pull?

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There are lots of different ways to say “credit inquiry”— you might hear “credit pull” or “credit check” or even “credit audit.” Terminology might seem unimportant when there are so many words with identical meanings. However, within all of these terms, there is one very important distinction that, if you mix it up, could end up costing you a lot: the difference between a soft and a hard inquiry.
The most pressing distinction between these two types of credit inquiries is the two very different effects they’ll have on your credit score. While a soft inquiry won’t affect your credit score at all, a hard credit inquiry could potentially weigh down your credit score for a few months and your credit report for up to two years.

What makes them different?

Why do these two very similar financial actions end up having such opposite effects on your credit score? The answer comes from subtle differences between what each is used for and, ultimately, what these differences signal to credit bureaus.
Though both hard and soft credit inquiries give you information about where your FICO credit score lies, they denote different reasons for asking for this information.

What’s a soft credit pull?

A soft inquiry is a credit inquiry that doesn’t always indicate that you are seeking your credit score so that you can borrow money. For example, if you look into your credit score yourself for purely informational reasons, this would be considered a soft inquiry. Additionally, if a credit card company looks into your credit score for pre-approved offers, that inquiry would also be considered soft. Finally, if a potential employer checks in on your credit score, this would also qualify as a soft credit check.
All in all, a credit check will almost certainly be considered soft if it is taken without your approval. That means that if you don’t expressly consent to a financial institution or a lender of any kind pulling your credit score, it should be considered soft and therefore should not affect your credit score. If a credit check affects your credit score, but you didn’t consent to it being taken, be sure to actively ask why the check was a hard inquiry.

What is a hard credit pull?

A hard inquiry, on the other hand, is any credit inquiry certainly indicates that you’re looking into your credit so that you can borrow money. This means any time you pull your credit so that you can apply for a personal, student, auto, or business loan; for a personal or business credit card; or for a mortgage. Credit bureaus define hard credit pulls this way so that they can keep track of what your intentions are for acquiring your score—it makes it easy for them to know how often borrowers are applying for financing.
This may seem daunting, but a financial institution can never make a hard inquiry on your credit score without your approval. Plus, if any similar hard credit inquiries are made within 45 days of each other, like if you’re pulling your credit score for multiple leasing applications, FICO will consider them as a single hard inquiry. So be sure to make your “rate shopping” shorter than that 45-day window to minimize the impact on your credit score. Even more, FICO claims that for many, a single hard credit inquiry won’t lower their credit score, and for others, a hard inquiry would only lower their credit score less than 5 points.
That being said, hard credit inquiries are best to avoid if they aren’t completely necessary. For instance, if you don’t have many accounts or if you have a relatively short credit history, a hard credit pull will lower your FICO credit score more significantly.
All in all, no matter the length of your credit history or how many accounts you have, a large number of hard credit inquiries in a short amount of time will indicate that you are trying to borrow a lot. As a result, these condensed credit pulls will lower your credit score because it indicates you aren’t quite as trustworthy as a borrower.

What does this mean for you?

All this info about soft vs. hard credit inquiries comes out to a few easy to understand and actionable lessons:

  1. Avoid hard inquiries into your credit score whenever possible.
  2. Always choose soft inquiries over hard inquires if a hard inquiry isn’t necessary.
  3. Keep your “rate shopping” period within the FICO single-inquiry threshold of 45 days to avoid lowering your credit score more than necessary.
  4. Beyond the 45-day “rate shopping” period, make hard inquiries into your credit as few and far between as possible.

All in all, despite these caveats, a hard credit inquiry isn’t the end of the world if it means you’ll be able to access funding that you might need to buy a car, own a home, or jump-start your business. As long as you have all of this necessary information to weigh the pros and cons of having your credit checked with a hard inquiry rather than a soft one, you’ll know what’s best for you and your financial future.

About the Author: Meredith Wood is Editor-in-Chief at Fundera. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.