Credit Inquiries: Hard Pull vs Soft Pull
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Today we’re going to dive into the difference between a hard pull and a soft pull and by the end of this, you should be an expert in identifying which one applies to which scenario and what they can potentially mean to the health of your credit score.
Let’s start from the top.
What Is A Hard Pull?
A hard pull, often referred to in the industry as a “hard inquiry” typically occurs when a lending institution, such as a bank or credit card issuer checks your credit report to make a financial decision.
Notice I said “financial decision”. This is important, because a hard pull creates a record on your credit report as it’s treated as an official inquiry to obtain a line of credit or a loan. More than 1 hard pull in a short timeframe can lower your credit score! One hard inquiry is usually OK within an 18 month timeframe, but more than that and you risk a lower credit score.
Why Do Hard Pulls Lower Your Credit Score?
If you look at it from the view of a potential lender it’s beneficial for them to know if you’re applying for a lot of credit or loans in a short timeframe. Why? Because data shows that consumers who are applying for multiple lines of credit, or multiple loans in a short timeframe are more likely to be doing so because they’re having a hard time obtaining a loan and possibly running out of money!
Would you lend money to a friend that was asking everyone they knew for a loan?
What are the odds you’d get paid back if that person was so desperate they were willing to ask anyone?
That’s the same analogy that FairIsaac uses in their FICO credit score algorithm and it essentially dings you when you start accumulating hard inquiries in a short timeframe, though FICO themselves say this on their website…
…most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time.
As comforting as that sounds, the timeframe isn’t clarified! Is it 1 month? 1 Week? 1 Year?
The general consensus is it’s about 14 days, or 2 weeks. Any hard inquiries outside this timeframe will be not be counted as “1 attempt to get a loan”, but multiple attempts, and will likely lower your credit score.
How Much Do Hard Pulls Affect Your Credit Score By?
For most people, one additional credit inquiry will take less than five points off their FICO Scores.
This sounds reasonable, but the truth is every single person is different and the amount of your deduction can vary wildly. If you run a quick search online for “hard inquires affecting credit scores” you will see some very different accounts.
For example, look at this one.
90 points! That’s absolutely insane!
Most credit scores cannot withstand a 90 point ding. In this persons case his score dropped from an excellent credit score of 735 to a miserable 645!
A score like that could disqualify you from many of the best loan offers!
That’s not to say this is typical, in fact, it’s probably an outlier. A 20 – 30 point drop wouldn’t be out of range, though. So, please be careful with hard inquiries outside a 2 week window!
How Long Do Hard Pulls Stay On Your Credit Report?
A hard inquiry stays on your credit report for 2 years.
As time passes the impact of the hard inquiry lessens, so it’s not too worrisome to see those hard pulls on your report if it’s been 12+ months. Lenders won’t likely factor in old inquiries like they would a current inquiry.
Think about it this way. If your friend stopped asking for a loan 2 years ago, you’d probably assume they found some help.
If they’re now asking for a loan again, you’re going to re-evaluate it on its own merits. 2 years ago was 2 years ago, and the situation might have changed dramatically.
As the inquiries drop from your credit report you may see a 1 – 5 point increase in your credit score.
Do I Have To Give My Consent For A Hard Pull?
Absolutely! Can you imagine if companies were allowed to run a hard inquiry on your credit without your knowledge or consent? That could be devastating!
Any company that runs a hard inquiry on your credit needs your consent.
There are some cloudy situations here, though. Keep in mind that when using certain lenders or websites that act as a lead service, you may be agreeing to allow your credit report to be pulled by many lenders at one time!
Unfortunately, this situation would be deemed consensual.
It really pays to read the fine print whenever applying for a loan or a credit card. If you are authorizing the company to share your information to other lenders that may pull your credit report, this could affect your score.
Can I Dispute A Hard Inquiry That Occurred Without My Consent?
Yes! If you’re checking your credit report regularly (get a free report at AnnualCreditReport.com) or belong to a credit monitoring service, you’ll see any activity on your credit report. If you notice a hard inquiry that was added without your consent dispute it immediately.
Note: You cannot dispute hard inquiries that occurred with your consent! If you could, we’d all do it!
Examples Of A Hard Pull
|Applying For An Auto Loan|
|Applying For A Credit Card
|Applying For A Mortgage or Refinancing|
|Applying For A Student Loan|
|Getting A New Cell Phone Contract|
|Opening A New Checking Account, Savings Account or Money Market Account At A Bank.
|Rental Applications (Apartment/Condo/Home)|
|Renting A Car (Sometimes)|
|Requesting A Credit Line Increase (Not Always)|
What Is A Soft Pull?
Soft pulls, commonly referred to as “Soft Inquiries”, are much gentler than hard pulls. So gentle that they actually do nothing to your credit score. They don’t even create a record!
Don’t fear the soft pull. They happen all the time.
The only real downside is they often happen without your consent, such as by your insurance company or during background checks. Thankfully there is no impact on your credit score!
Do Soft Pulls Hurt Your Credit Score?
No. It does nothing. Your score is safe…for now!
One of the most common misconceptions about credit inquiries are that they hurt your credit score, but if you’ve read this article you know that only hard inquiries impact your credit score! Feel free to take a look at 5 Credit Score Myths to clear up any other confusion you might have.
Examples Of A Soft Pull
|Checking Your Own Credit Score|
|Background Checks & Employers|
|Credit Line Increases & Pre-Approved Credit Cards (Sometimes)|
|Utilities (Cable, Internet, .etc)|
|Bank Accounts: Credit, Savings (sometimes hard or soft, definitely ask!)|
|Rental Application (Home/Apartment/Condo)|
|Car Rentals & Equipment Rentals|
Hopefully you are now an expert on the difference between hard pulls & soft pulls, and fully understand how each will or won’t affect your credit. We’re hoping this newfound knowledge has not only made you smarter, but a better person overall. You are now free to save kittens from trees and solve other crises in the world!