Here's the Difference Between Hard and Soft Credit Checks

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Not all credit inquiries are created equal.

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It happens to most of us sooner or later -- we apply for some form of credit, be it a bank loan, credit card, or some other type of debt instrument. Or we’re in a situation where a would-be business partner -- say, a possible employer -- wants to get an idea of how fiscally responsible we are.

In order for these parties to do so, they may conduct a credit check. In other words, they look to some degree at your credit score and history.

This check comes in two flavors -- hard and soft credit inquiries. There are important distinctions between the two, and it’s worth getting to know them both.

What is a hard credit check?

Any entity that is potentially lending you money and is looking in depth at your credit history and profile in order to make a decision is conducting a hard credit check. These entities have access to your entire updated credit history.

There are many events that generate hard credit checks. Some of the most common applications that trigger one are:

  • Mortgages
  • Business loans
  • Student loans

In order for potential lenders to conduct a hard credit check, they typically must obtain your express permission to do so.

Hard credit checks can and do knock points off your credit score. That’s the bad news. The good news is, these dings aren’t very significant. According to Experian, one of the three major credit bureaus (along with TransUnion and Equifax), a FICO® Score usually takes a five to 10 point hit for a hard credit check. Hard credit checks stay on your report for two years.

But what happens when you’re “rate shopping,” i.e. applying for credit from a set of rival providers to draw out the most advantageous offer? Credit bureaus realize this is a thing, and they adjust their dinging accordingly. Multiple inquiries made within a certain period (two weeks or so seems to be the norm) usually count as one single check.

And what is a soft credit check?

Simply put, a soft credit check is a look at a summary of your credit profile from entities that aren’t potentially loaning you money.

As with other credit-checking entities, these individuals or organizations want to gauge your creditworthiness, although the reasons differ. There are many occasions where a soft check would be in order. To name a few of these:

Landlords -- To judge your ability to pay rent on time.

Potential employers -- To determine financial responsibility and general management skills.

Credit card issuers -- Always on the hunt for new customers, these purveyors of plastic have soft-checked your profile and determined you’d be a safe risk for one of their cards. In the credit card sphere, this is called “pre-approval.”

You can also get pre-approved on your own, by visiting the websites of certain issuers and cards. This is where you might find language like “XYZ Card: Approval in minutes!”

Insurance providers -- Similar to credit card issuers, they may have judged that you’re fiscally responsible enough to be pre-approved for one or more of their products.

You -- Self-checking your credit profile is always considered a soft inquiry.

Soft checks do not affect your credit score in any way.

In contrast to a hard check, the person or business conducting the soft variety doesn’t necessarily need to obtain your permission to do so. Whether or not they do depends on the nature of the check. For example, pre-approved credit card offers don’t require permission, but your possible future employer does.

This is mandated by law. The federal Fair Credit Reporting Act stipulates that only entities with a “valid need” can access a copy of your report.

So don’t worry about a vengeful ex or a nasty co-worker getting their hands on your report and broadcasting it to the world. Only those with a valid reason for taking a look should be able to cast their eyes on it.