How does a soft credit check work?


What is a soft credit check?

A soft credit check (also known as a soft credit inquiry or soft credit pull) is the type of check needed to decide whether to provide you with a loan or not. A soft credit check occurs when a potential employer, lender or credit card issuer checks your credit in order to approve your application.

The advantage of a soft credit check is that it does not affect your credit rating at all. This way, if your lender is conducting a soft credit check, you can be sure that your credit score will not get worse.

How does a soft credit pull work?

Often, soft credit checks occur when a person or company is checking your credit as part of a background check. As stated, this can happen when an employer or lender checks if you can qualify. You may be aware that hard inquiries remain on your credit report for two years. However, it is important to note that often their impact is usually minimal and only lasts a few months.

As opposed to a hard check, a soft request occurs when someone wants to check your credit report but you have not applied for a new loan. Soft checks do not affect your credit score.

When does the soft credit check occur?

A soft credit check may be required if:

  • One of your current lenders is checking your credit
  • You are applying for a preapproval
  • You are checking your own credit
  • The company checks your credit to see if you qualify

Of course, before applying for any type of financing, you can ask the company or lender whether they are doing soft or hard credit checks and decide if it is suitable for you or not.

Can I see soft credit checks on my credit report?

Yes, you can often see soft credit pulls on your credit report. Every 12 months, you can request one free copy of your credit report from each major credit bureau (Experian, TransUnion and Equifax). Note that soft credit checks may be in the separate section of your credit report.

 How do soft credit checks affect the credit score?

There are several credit rating models (FICO is the most popular one) that analyze the information on your credit report and generate your credit score. As mentioned, soft credit checks do not remain on your report and do not affect your credit score.

Note, however, that a hard credit check often stays on your credit report for about 2 years and also affects your credit rating. Most often, after a hard credit check, credit ratings are restored within a few months. Thus, the impact of a hard credit check is not that great. Typically, valuation models only take into account hard checks that have been made in the last 12 months. Also note that a few recent hard checks can hurt your credit score significantly.

What is the difference between a soft and a hard credit check?

Simply put, a soft credit check does not harm your credit score and does not remain on your credit reports. Since soft credit check is not related to a specific application for a new credit, it is only visible if you check your credit report yourself.

In contrast, a hard credit check affects your credit history and remains on your credit reports. However, the impact of a hard credit check is often not significant. However, a large number of hard inquiries in a short period of time can worsen your credit. Therefore, it is not worth applying for multiple credit cards or loans in order to avoid deteriorating your credit.