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Soft Credit Inquiry Vs. Hard Credit Inquiry

Soft Credit Inquiry Vs. Hard Credit Inquiry

Before we dive directly into this topic, let’s get a clear view of what these concepts mean. It’ll help you understand Soft Credit Inquiry vs. Hard Credit Inquiry even better.

Credit Inquiry

These inquiries are also known as “credit pulls” because you or any financial organization is pulling information about you from the credit Bureaus Files (Experian, Equifax, TransUnion) These are the three major credit bureaus from which the creditor or lender requests for your credit report. Credit Inquiry is an inquiry made by you or by the possible lenders, creditors, employers, or landlords to review your credit report for understanding your financial actions. Credit Inquiries can play one of the factors for the approval or rejection of your credit request. These inquiries remain on your credit report for two years. Soft Credit Inquiry vs. Hard Credit Inquiry can be very useful information if you understand the terms well.

Soft Credit Inquiry

It happens when you or someone you authorize (like a possible employer) checks your credit report. A soft credit inquiry is also known as a soft credit check or soft credit pull. They can also happen when a company such as a credit card issuer or mortgage lender checks your credit to pre-authorize you for an offer. Soft inquiries don’t impact your credit scores because they aren’t attached to a particular request for credit.

Hard Credit Inquiry

A hard credit inquiry or a “hard pull,” occurs when you apply for a new line of credit, such as a credit card or loan. It means that a creditor has requested to look at your credit file to determine how much risk you could be in as a borrower. Hard inquiries show up on your credit report and can affect your credit score. So, it’s necessary to understand how they will impact you.

Hence, a hard credit inquiry occurs when lenders can see many missed bill payments, for example, as a sign that you’re likely to miss a payment again in the future. This could lead to you getting denied a loan or being charged higher interest rates. To get the information, the lender must request your credit file from the credit bureaus and that results in a hard credit inquiry. That inquiry, in turn, will appear on your credit report. 

On the other hand, a soft inquiry is when you check your own credit or when a company wishes to see if you are eligible for a loan offer but you haven’t yet submitted a full request. Soft inquiries do not impact your credit score. Both Credit Inquiries are very different from each other, here are some examples of soft credit checks vs hard credit checks.

Examples Of Soft Credit Pull Vs Hard Credit Pull

The difference between a hard and soft credit pull generally comes down to whether you gave the lender permission to check your credit. If you did, it may be reported as a hard inquiry. If you didn’t, it should be reported as a soft inquiry. There are many types while comparing Soft Credit Inquiry vs. Hard Credit Inquiry. Here are some examples of when a hard inquiry or a soft inquiry might be placed on your credit reports. 

Common Hard Credit Inquiries

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

Common Soft Credit Inquiries

  • Checking your credit score on Credit Karma
  • “Pre Qualified” credit card offers
  • “Pre Qualified” insurance quotes
  • Employment verification (i.e., background check)
  • Remember that there are other types of credit checks that could show up as either a hard or soft inquiry. For example, utility, cable, internet, and cell phone providers will often check your credit.

If you’re unsure how a particular inquiry will be classified, ask the company, credit card issuer, or financial institution to distinguish whether it’s a hard or soft credit inquiry. Here is more insight into soft vs hard credit checks. 

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Soft Credit Check vs. Hard Credit Check

When Is It Performed?

A soft check is performed when the borrower wants to review his credit report for a better understanding of their financial behaviour. Soft check occurs even when the person didn’t apply for credit, so, many potential lenders, credit card, and insurance companies can also perform the soft check to see if the person qualifies for pre-authorized offers. Every inquiry is recorded on a credit file but isn’t visible to companies so it won’t affect their lending decision. It is mostly used for a personal credit check, pre-authorized credit offer, or insurance approval.

Hard Check is performed when an individual gives their consent to the financial institution or potential lenders to check whether they are fit to apply for it or not. Financial institutions perform the hard check for understanding the financial behaviour of the individual. The hard check credit report shows the existing payment history, credit inquiries, loan history, identifying information, public records, credit score, collection accounts, etc. This information helps them make a decision regarding the person’s credit request, whether to approve or reject the application, whether they are capable of repaying the amount on time based on their repayment history. 

What Impact Does It Have On Credit Score?

It is important to know what impact does credit score have along with Soft Credit Inquiry vs. Hard Credit Inquiry. Soft check does not have any negative impact on credit score, as every inquiry is clearly recorded in the credit file but they are not visible to companies. So based on that the company cannot make a lending decision. It’s just an initial check on your credit report which financial institutions perform to see if the person qualifies for pre-approval offers.

Whereas, a hard credit check may negatively impact your credit score, as the company can do a complete check on your credit report and can see each and every inquiry you have made. Too many hard inquiries in a short period of time have a negative impact on your credit score. 

Thank you for reading this blog on ‘Soft Credit Check vs. Hard Credit Check’ If you’d like to read more, here are some blogs that might be of interest to you:

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Soft Credit Inquiry Vs. Hard Credit Inquiry

Soft Credit Inquiry Vs. Hard Credit Inquiry

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