Hard pull vs Soft pull: What’s the Difference, Affect on credit scores

Hard and soft pull are credit checks or credit inquiries done by lenders or creditors to access a customer’s credit report. A customer’s credit report can be accessed through any of the three major credit bureaus. The three major credit bureaus are Experian, Equifax, and TransUnion.

Experian, Equifax, and TransUnion provide the credit report upon the request of lenders or creditors. Lenders’ or creditors’ purpose of access determines whether it will be hard or soft inquiries. Hard or soft inquiries are ways for lenders or creditors to determine whether the customer is qualified for a credit application or loan.

How Do Hard Pull Vs Soft Pull Work?

Hard pull vs. soft pull works by requesting a customer’s credit check. A customer’s credit check is accessed by lenders or creditors through the three major credit bureaus. The three major credit bureaus provide the hard pull or soft pull of a customer’s credit report.

A hard pull starts when the customer applies for credit or a loan from the lender or creditor. The lender or creditor requests a hard pull to check if the customer is qualified for the credit or loan. The credit or loan depends on the credit report the lender or creditor secures from any of the three major credit bureaus. The credit report contains the past and current financial behavior of the customer, such as payment history and balances on loans and credit cards. The past and current financial behavior of the customer determines if the lender or creditor will grant or deny the credit or loan application.

A soft pull starts when the customer or a company like a credit or lending institution requests for the customer’s credit report. The customer’s credit report reflects the customer’s financial behavior. The customer’s financial behavior is reviewed by the lending or credit institution to screen for a preapproval financing offer or background check.

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What Is The Difference Between Soft And Hard pull?

The difference between soft and hard pull inquiries are shown by three factors:

• Impact on Credit Score of the Customer
• When the inquiry is used by the Creditor or Lender
• Consent by the Customer

The customer’s credit score is not affected by soft inquiries. Soft inquiries are visible in the credit report only to the customer. The customer’s credit score can be affected by a few points in the short run with hard inquiries. Hard inquiries, when done frequently, can also give the impression that the customer is a high-risk one for lenders or creditors.

Lenders or creditors perform a soft inquiry in many cases. These cases include credit card offers, background checks by employers, and credit checks by the customer. The customer, when applying for a loan, credit card, or mortgage, can have hard inquiries from lenders or creditors. Lenders or creditors check the customer's credit history before making a credit decision. A credit decision is whether to grant or deny the loan to the customer.

The customer’s consent is not required for soft inquiries. Soft inquiries do not require the customer to sign a credit report authorization. A credit report authorization is a document that gives the lenders or creditors permission to make hard inquiries. 

What Is A Hard Pull Inquiry?

A hard inquiry, according to the Consumer Financial Protection Bureau (CFPB), is a standard inquiry by lenders. Lenders perform a hard inquiry after a customer files an application for credit. An application for credit frequency can impact the credit score of a customer.

A customer can have the lender or creditor perform hard inquiries on their credit report under other circumstances, such as:

• Applying for certain jobs
• Setting up new utility services
• Applying for new insurance
• Completing a background check
• Requesting a credit line increase
• Applying for a new apartment or home rental

A hard inquiry can be disputed by the customer in cases of fraud. Fraud happens when an identity thief uses the customer's Social Security Number (SSN) and other Personally Identifiable Information (PII), such as:

• Employee Identification Number
• Passport information
• Medical records covered by HIPAA laws
• Banking accounts
• Credit and debit card numbers
• Electronic and digital account information, including e-mail addresses and internet account numbers
• Biometric information
• Passwords
• School identification numbers and records
• Private personal phone numbers and mobile numbers

This sensitive information is used in opening a new account under the customer's name, who is now an identity theft victim.

How Does Hard Pull Affect Credit Score?

A hard pull, according to the Fair Isaac Corporation (FICO), can impact the FICO score when done with greater frequency. Greater frequency means opening several credit accounts for a short period of time with an exception for rate shopping.

Rate shopping includes mortgage, auto, and student loans. These types of loans are ignored by the FICO score within 30 days when a lender or creditor performs a credit inquiry. A credit inquiry done older than 30 days will be considered inquiries, which fall in a typical shopping period as just one inquiry, by the FICO score.

The FICO score considers the last 12 months of recorded credit inquiries. Credit inquiries within a short period of time will result in multiple inquiries appearing on the credit report. A credit report with multiple inquiries can equate with a higher risk. Higher risk can also result in a lower FICO score.

The FICO score impact is dependent on the unique credit history of a customer being performed by a credit inquiry. A credit inquiry, in general, has a small impact on a customer’s FICO score. A customer’s FICO score that is ranged from 300 to 850 can decline by less than 5 points for every additional credit inquiry.

Additional credit inquiries have a greater impact on a customer with a few accounts or short credit history. A customer with six or more credit inquiries, according to FICO, is eight times more likely to declare bankruptcy compared with no credit inquiries.

Credit inquiries, as mentioned above, play a part in assessing the risk. Assessing the risk is essential for lenders and creditors in evaluating their customers using credit inquiries. Credit inquiries, on the other hand, play a minor role in the FICO score. The FICO score is only affected by new credit inquiries by 10% as compared to more important factors. More important factors are how customers pay their bills and their overall debt burden as reflected in their credit reports.

What Is A Soft Inquiry?

A soft inquiry, according to CFPB, is a review of a customer's credit file. A review of a customer's credit file includes the existing accounts by lenders, inquiries by prospective lenders, and the customer’s annual credit report requests. These inquiries will not affect a customer’s credit score.

A customer’s credit score, according to FICO, will not be affected by other types of soft inquiries, such as:

• Getting an updated FICO score on all customers of a bank to check the credit quality of its customer base
• Pulling a new employee’s credit report by the employer as part of its new employee screening process. 

A soft inquiry is important for a customer to understand better how the credit score is reported by the three major credit bureaus. The three major credit bureaus provide a free copy of the customer's credit report every 12 months, as stated in the Fair Credit Reporting Act (FCRA). The FCRA regulates how the three major credit bureaus collect and share the customer’s financial information.

The customer’s financial information in the credit report also includes a soft inquiry list. The soft inquiry list contains the date of the inquiry and the names of the requester. The names of the requester can provide useful information as to which companies are considering the customer as a qualified credit or loan candidate.

Do Soft Checks Affect Credit Score?

No, soft checks do not affect a credit score. A credit score, when requested by a lender or creditor for checking, is considered a soft check. A soft check is not visible to potential lenders or creditors that may view a customer’s credit report. A customer’s credit report with soft checks is only visible to the customer and will stay for 12 to 24 months, depending on the kind.

Compare a Soft credit check vs. hard credit check

A soft credit check vs. a hard credit check, according to Forbes, varies on how each type of inquiry will impact a customer’s credit score.

A customer’s credit score is affected by a hard credit check. A hard credit check usually happens on certain types of applications like the following:

• Loan applications, such as a mortgage, auto, student, personal, etc.
• Credit card applications
• Credit limit increase requests
• Additional lines of credit applications
• New utility applications
• Apartment rental applications
• Collection agency skip tracing

A soft credit check has no effect on a customer's credit score. A customer’s credit score is viewed by lenders or creditors when they perform credit checks. Credit checks that are considered soft inquiries are the following:

• Personal credit checks
• Pre-approved credit offers
• Insurance applications
• Account reviews by current lenders or creditors
• Employment applications

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