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What’s the Difference Between a Soft and Hard Credit Check?

April 9, 2019

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Looking for a pre-approval for a personal loan or student loan refinancing? That's likely a soft credit check. Submitting a mortgage application or opening a credit card? That's a hard credit check. Hard, soft, what's the difference and why does it matter?

Credit checks, or inquiries, are added to your credit reports and can remain there for up to two years. In general, inquiries don’t play a large role in credit scoring, and you don’t have to be preoccupied with them. However, hard inquiries can hurt your credit scores.

Understanding how credit inquiries work and when they’ll impact your credit scores could help you wisely manage your credit and finances. It can be particularly important leading up to a major financial decision, such as applying for student loan refinancing, an auto loan, or mortgage.

There are two types of inquiries: soft and hard

The major credit bureaus — Equifax, Experian, and TransUnion — collect and store your information and create credit reports. They distinguish between two types of inquiries, soft inquiries and hard inquiries.

Sometimes, inquiries are called hard pulls and soft pulls, because they’re the result of someone “pulling” your credit report. But we’ll stick with calling them inquiries.

The distinction depends on who pulled your credit report and why they wanted to review your credit. And it’s important because soft inquiries never impact your credit scores while hard inquiries could have a negative impact.

Soft inquiries — when they happen and why they never impact your credit scores

A soft inquiry could be added to your credit report when someone reviews your credit report for a reason other than approving or denying an application.

Common examples are when:

  • You check your own credit.

  • A company you already work with reviews your credit. For example, your credit card issuer may check your report to decide whether to increase or lower your credit limit.

  • An employer checks a credit report as part of the job application process.

  • Companies receive your credit report as part of a marketing campaign before sending out pre-approval loan or credit card offers.

A soft inquiry could happen without your knowledge or permission, but it will never impact your credit scores.

In fact, soft inquiries only appear on copies of your credit report if you’re the one requesting your report. Your report even separates soft and hard inquiries into different sections and list the soft inquiries as, “requests viewed only by you,” or, “inquiries that do not impact your credit rating.”

Hard inquiries are the result of an application for credit

A hard inquiry is the result of a credit check that you’ve authorized and is part of a lending decision. Hard inquiries can happen when:

  • You apply for a credit card.

  • You apply for a loan, including a personal loan, private student loan, auto loan, or mortgage.

If there’s a paper or online application, you may need to sign your name or check a box to verify that you agree to let the company review your credit (the disclaimer might not use inquiry or credit pull, but that’s what’s happening).

You can also give verbal consent, such as when you’re at a car dealership and ask the finance manager to find a loan for you. Often, you’ll see many hard inquiries as a result because they’ll use your information to apply for an auto loan from different lenders so you can compare rates.

One important thing to note is that the hard inquiry will still be added to your credit history if your application is denied.

Some applications could lead to either a soft or hard inquiry

There are a few situations when your application could lead to either a soft or hard inquiry. In these cases, you may want to ask the company before proceeding:

  • You apply for a loan or credit card pre-approval or prequalification.

  • You apply to open a new checking or savings account.

  • You apply to rent an apartment.

  • You apply to open a new utility, phone, internet, or cable account.

Although you might not always have a choice (you’ll want to get your utilities set up and the power turned on no matter what), at least you’ll know when and why inquiries get added to your credit history.

Here’s what you need to know when it comes to hard inquiries and credit scoring

Unlike soft inquiries, a hard inquiry will appear on copies of your credit reports that others receive and it could negatively impact your credit scores.

  • A hard inquiry can remain on your credit report for up to two years.

  • Most credit scoring formulas only consider inquiries from the last 12 months.

  • A single hard inquiry might not impact your credit scores at all. If it does, your score may drop a few points.

  • As long as there isn’t any new negative information (such as a missed payment), credit scores tend to recover from a single hard inquiry within a few months.

  • However, multiple hard inquiries can lead a larger drop in your score.

  • Hard inquiries can have a more significant impact if you’re new to credit or don’t have many accounts on your credit report.

Hard inquiries may lower your credit scores because there’s a correlation between having hard inquiries on a credit report and missing bill payments. It can be frustrating, but it actually makes sense. People who are opening new accounts and taking on new debts may have a harder time covering all their bills.

Because hard inquiries can hurt your credit, and the impact may increase with each hard inquiry, you may want to be careful when applying for a new loan or credit card.

If you’ve checked your credit and found you have a low score, applying for a premium rewards credit card that you’re unlikely to get approved for might be a bad idea. You could wind up getting denied and with a new hard inquiry.

You can still shop for loans without worrying about hard inquiries

The companies that make credit scores recognize that shopping for a loan isn’t necessarily risky behavior. Quite the opposite, it’s likely a savvy financial move. For example, you might apply for a mortgage from multiple lenders with the intent of accepting the best loan offer you receive.

With this in mind, certain rules can keep multiple hard inquiries from impacting your credit scores. The rules vary depending on the credit scoring formula, but these are the two most common:

  1. 30-day buffer: Many FICO credit scores won’t consider inquiries from student loans, auto loans, or mortgage applications that occurred during the previous 30 days when calculating a credit score.

  2. Hard inquiry deduplication: FICO and VantageScore credit scores will “dedupe” inquiries, and consider multiple hard inquiries as a single inquiry for credit scoring purposes. All the hard inquiries will still appear on your credit reports, they just aren’t considered by the scoring formula.

    The most recent VantageScore models dedupe all inquiries that occur within a 14-day period. If you apply for a credit card and the next day you apply for 10 auto loans, that will only count as one hard inquiry when determining your VantageScore credit scores.

FICO treats some inquiries that fall within a 14-day period (for older scoring models) or 45-day period (for newer scoring models) as one . However, that only goes student loan, auto loan, and mortgage inquiries.

Don’t overthink it

We know that’s a lot of information about a very specific part of your credit history and score. And one of the odd things about credit inquiries is they get lots of attention, but they generally aren’t that important when it comes to determining credit scores.

Here are a few simple rules of thumb that can help you build and use your credit wisely:

  • Don’t apply for new credit accounts in the months leading up to an application for a major loan.

  • Find out whether a lender will use a hard inquiry before applying for a loan pre-approval or prequalification.

  • Unless you really need the money or benefits, reconsider applying for a loan or credit card if you think there’s a low chance you’ll get approved.

  • If you’re shopping for a student, auto, or mortgage loan, try to submit all your applications within a 14-day period.

  • While a hard inquiry could drop your score slightly, it shouldn’t scare you off from opening an account you need or can benefit from using.

Louis DeNicola is a freelance personal finance writer and credit enthusiast. You can find him on Twitter @is_lou.

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Louis DeNicola

Louis DeNicola

Louis DeNicola is a freelance finance writer based in Oakland, California. He specializes in consumer credit, personal finance, and small business finance, and loves helping people find ways to save money. In addition to Varo, Louis works with a variety of financial services firms, credit bureaus, and educational websites, including Credit Karma, Wirecutter, Funding Circle, and Experian.

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