By Lara Adams / Updated: Sep 19, 2019

Hard and Soft Credit Checks: What is the Difference and Impact on Credit Score

Soft Credit Check vs Hard Credit Pull

If you are thinking about buying something on credit or taking out a loan, a high credit score will make the borrowing a rather smooth process. Behind lender’s availability to grant someone money, there is a complex machinery called credit score.

Your Credit Score Determines Your Suitability

A credit score is a synthetised numerical expression that represent the level of creditworthiness of a person. It comprehends all the information about the debts of a person and is calculated according to specific methodologies.

Traditional Credit Scores

There are three major credit bureaus in the United States:

They collect data related to personal debt from all companies that agreed to send them information related to crediting. A person’s Credit Score is based on the Credit Report issued by them.

Generally, a credit score reflects information regarding your payment history, duration of your credit, types of credits you used, your debt, and hard inquiries on your credit report. After the data has been processed, it is consolidated, and issued through a traditional Credit Report.

Alternative Credit Scores

Apart from the traditional credit scores, there are several companies that provide credit scores calculated according to a different method. Using alternative data provides better insights on alternative factors that influence the credit score. For example:

  • ScoreLogix uses employment and income data in specific zip codes.
  • Lenddo uses Facebook profiles to analyze risk.
  • Kabbage uses e-commerce histories from sites like Amazon for underwriting purposes.
  • Kreditech uses consumers’ online data and machine learning to provide access to higher credit and digital banking services.

Credit Score Inquiries

Your credit score is viewed each and every time you apply for credit. Checking your credit score is a way the lenders determine the risk. In such a way they work out if you are a worthwhile investment.

When applying for apersonal or business loan, your personal credit is often one of the primary factors for approval. It means that lenders will typically pull either a hard credit check or a soft credit check on you.

What Is a Hard Credit Check?

A hard credit pull is one of two types of credit inquiries. They are used for loan and credit card applications. People can have full access to your credit report when carrying out a hard credit check. This includes all your personal data, past loan inquiries, and your credit score.

Most importantly: A hard credit check requires your approval.

If you sign up for a new cell phone contract, that may trigger a hard credit pull as well. The thing to remember with a hard credit check is that you needed to have taken some action, such as applying for credit, for example.

Can a Hard Credit Check Affect Your Credit Score?

Yes, it can adversely affect your credit score. A good rule of thumb is that every hard credit check will hit your credit score by 1 – 5 points. Your score may bounce back in under a year, but the hard inquiry will stay on your report for 2 years, and anybody else who does a hard credit inquiry will be able to see it.

How it Affects Your Points

To give you an idea, personal credit scores can range from 300 – 850. A “good” score is somewhere in the range of 700 – 725. If a hard credit pull lops 5 points off your score, your credit rating might drop from fair to poor.

It doesn’t sound like a lot, but too many inquiries will make a lender think about your credit risk. It’s possible that too many credit applications are a sign of financial distress. If you have a borderline credit rating, even a 5 point reduction might affect more favorable loan terms.

What Is a Soft Credit Check?

If a lender or creditor checks your credit as part of a background check, or for a pre-approval process, then that’s a soft credit check. These checks can take place without you knowing about them and without your permission.
A soft credit pull only provides a summary and does not affect your credit score.

A good example is when you receive a credit card pre-approval in the mail, the company has done a soft credit check on you. When you ask for your credit report, that is also a soft pull.

Can a Soft Credit Inquiry Affect Your Credit Score?

No, it does not affect your credit score. Other entities that might check your credit will not even see the soft credit checks as they appear in a different part of the report.

What is the Difference between a Hard & Soft Credit Check?

There are 3 significant differences between a hard credit check and a soft credit check.

  • The depth of information,
  • The level of authorization needed,
  • The way in which the two types of credit pulls affect your credit score.

No Credit Check Loans

A lender will only provide funds after a thorough check of the individual’s credit history. This may be a bit humiliating for the borrower, as they know they have very little chance of getting a good loan offer. For them, the best bet is a loan without a credit check. It’s a bit risky for the lender if they don’t know any background regarding the person’s creditworthiness.

Therefore, most online lenders make only soft credit inquiries that do not affect borrowers’ credit score. Such loans are named “no credit check loans”, only because your credit score is not hurt.

The Money is Needed For…

Borrowers can use loans for any purpose. They can use it for:

  • Any home improvement plan,
  • Financing a car,
  • Funding a weekend vacation.

In fact, good lenders do not place any conditions on how to use the loan money. Though, we urge you to use online loans only in case of emergency, because the interest rate is quite high.

Income and Employment Are Deciding Factors

Along with alternative credit check, the lender looks at other avenues to determine the suitability of the borrower. Proof and duration of employment are good examples of this. The lender can see that they are dealing with someone who is at least financially stable regarding continual income. In fact, the salary of the individual would be a deciding factor.

Online Applications and Research

To get a good deal on online loans, a borrower must search for the right offers. In this IT-enabled world, it is effortless because a borrower can get quotes and compare APR’s and other loan parameters at the click of a button. Almost every lending and financial institution have a website and a toll-free number. A fast response is guaranteed if a borrower applies online, with all the relevant details.

Works Cited

1 “”

2 “What are inquiries and how do they affect my FICO score?”

4 Experian Information Solutions “What Is a Good Credit Score?”

5 Bloomberg LP “How More Americans Are Getting a Perfect Credit Score”

6 Consumer.Gov “Your Credit History”

7 “Credit Reports and Scores”

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