When it comes to your credit, you may hear terms like "soft credit check" and "hard credit check" being used. Both are types of credit inquiries, but they serve different purposes and have different impacts on your credit score.
Understanding the difference between the two is crucial for making informed financial decisions, especially when applying for loans, credit cards, or mortgages. Let’s explore both types of credit checks in more detail.
What is a Soft Credit Check?
A soft credit check (also known as a soft inquiry or soft pull) is a type of credit inquiry that does not affect your credit score. These checks are often done without your permission or without you needing to take any formal action. Soft credit checks occur in situations where you’re not directly applying for credit, but your creditworthiness is still being evaluated.
Examples of Soft Credit Checks:
- Pre-approved Credit Offers: When credit card companies or lenders send you pre-approved offers, they often perform a soft check to determine if you’re eligible.
- Personal Credit Monitoring: If you check your own credit score, that’s considered a soft pull.
- Background Checks by Employers: Employers may perform soft credit checks to evaluate your financial responsibility, but these checks do not affect your credit score.
- Current Lender Reviews: If you’re already working with a lender and they want to review your credit as part of an account management process (like checking for rate changes), they may conduct a soft credit check.
The good news? Soft credit checks don’t impact your credit score. They’re harmless and won’t show up on your report as a red flag to lenders.
This matters for mortgages specifically: at Altgage, both prequalification and preapproval use a soft pull, so you can see your rate and get a preapproval letter without touching your score. Read pre-approval vs pre-qualified vs underwritten for the difference between the three.
Key Features of Soft Credit Checks:
- No Impact on Credit Score: Since soft checks do not indicate that you are seeking new credit, they do not lower your score.
- Often Done with Your Knowledge or Consent: In some cases, you may be aware that a soft check is being done, especially when checking your credit or receiving pre-approval offers.
- Frequent Occurrence: Soft credit checks happen more frequently than hard checks, often without you realizing it.
What is a Hard Credit Check?
A hard credit check (also known as a hard inquiry or hard pull) is a more thorough review of your credit that occurs when you apply for new credit, such as a loan, credit card, or mortgage. This check typically requires your permission, and unlike soft credit checks, it can impact your credit score.
Examples of Hard Credit Checks:
- Applying for a Loan: When you apply for an auto loan, personal loan, or mortgage, the lender will perform a hard credit check to assess your financial history.
- Credit Card Applications: Each time you apply for a new credit card, the credit card issuer will perform a hard inquiry to determine whether to approve your application.
- Renting an Apartment: Some landlords may perform a hard check on your credit when deciding whether to rent a property to you.
- Applying for a Line of Credit: When you apply for a home equity line of credit (HELOC) or a business credit line, the lender typically performs a hard inquiry.
Key Features of Hard Credit Checks:
- Impact on Credit Score: Hard inquiries can slightly lower your credit score, typically by a few points. However, the impact is usually minor, and it is often temporary.
- Effect on Credit Applications: Multiple hard inquiries within a short period can suggest that you may be taking on too much new debt, which could hurt your creditworthiness.
- Only with Your Consent: Lenders and creditors will typically ask for your permission before performing a hard inquiry, and you must agree to allow them to check your credit.
- Lasts Longer on Your Report: Hard inquiries can stay on your credit report for up to two years, but their effect on your credit score fades over time.
The Mortgage Exception: The 45-Day Rate Shopping Window
Mortgage inquiries are treated differently from every other kind of hard pull. Under FICO scoring, all mortgage inquiries within a 45-day window count as a single inquiry. You can apply with five lenders in the same month and take one inquiry's worth of impact — typically 3 to 5 points.
This rule exists specifically to encourage rate shopping, and not using it costs you far more than the inquiry does. VantageScore uses a tighter 14-day window, so doing your comparison shopping inside two weeks covers both models. For the full explanation, read does getting preapproved hurt your credit score?
More Articles from Altgage:
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Differences Between Soft and Hard Credit Checks
| Factor | Soft Credit Check | Hard Credit Check |
|---|---|---|
| Impact on Credit Score | No impact on your credit score. | May lower your credit score by a few points. |
| When They Are Used | Used when you’re not actively seeking new credit, such as for pre-approval offers or credit monitoring. | Used when you are applying for new credit, such as a loan, credit card, or mortgage. |
| Permission Required | Can be done without your explicit permission in some cases (e.g., employer background checks, pre-approved credit offers). | Always requires your consent, usually as part of a credit application process. |
| Visibility on Credit Report | Does not appear on your credit report in a way that others can see it, except for you. | Appears on your credit report and can be seen by potential lenders and creditors. |
| Frequency | Happens more frequently and is not tied to specific credit applications. | Happens less frequently, typically only when you’re applying for new credit. |
How Altgage Makes the Process Simple
At Altgage, we specialize in making your mortgage journey as seamless as possible. Here's how we can help:
- Pre-Approval Guidance: We start with a soft credit check to evaluate your eligibility without affecting your credit score.
- Transparent Processes: We explain every step of the mortgage process so you’re never in the dark.
- Tailored Solutions: Our team analyzes your credit history and financial situation to recommend the best mortgage options for you.
- Support Throughout: From initial inquiries to closing, we’re with you at every stage to ensure a smooth experience.
Your dream home is closer than you think with Altgage’s expert guidance and personalized support.
Why Do Credit Inquiries Matter?
Understanding how both types of inquiries impact your credit score is crucial because it can influence your financial decisions. For example, applying for multiple credit cards or loans in a short period could signal to lenders that you are taking on too much debt, potentially making it harder to get approved. In contrast, a soft credit check will not negatively affect your ability to secure credit.
It’s also important to regularly monitor your credit report to ensure there are no unauthorized or unexpected hard inquiries, which could indicate potential fraud or identity theft. Pull your reports free at annualcreditreport.com, the only federally authorized source.
How to Minimize the Impact of Hard Credit Checks?
If you’re concerned about the potential impact of hard credit checks on your credit score, here are a few strategies to minimize the effect:
- Limit the Number of Applications: Avoid applying for too many credit products at once. Each hard inquiry can slightly lower your credit score.
- Do all mortgage shopping within 14 days: This keeps you inside both the FICO and VantageScore rate-shopping windows, so multiple lender pulls count as one.
- Check Your Credit Regularly: Keep track of your credit report so you can spot any hard inquiries or errors that may affect your credit score.
In general, soft credit checks do not affect your credit score and are usually harmless. Hard credit checks, on the other hand, can cause a temporary dip in your credit score, but the impact is often minor. The key takeaway is to be mindful of when hard credit checks are happening - especially when applying for new credit - and ensure that you’re managing your credit responsibly.
By understanding the differences between soft and hard credit checks, you can make better decisions about your credit applications and maintain a healthy credit score.
See what your score qualifies you for at rates.altgage.com — no credit pull required — or get pre-approved.
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