With consumers paying more attention than ever to their credit score, you may have come across the terms “soft” or “hard” credit check. But what do they mean, and what is the difference?
The most important distinction is that a hard inquiry on your credit report is visible to others pulling your credit report and may lower your credit score. A soft inquiry is only visible when viewing your own report — not to potential lenders — and does not impact your credit score.
What is a soft inquiry? When does it appear on your credit report?
A soft credit inquiry (sometimes called a “soft pull” or “soft credit check”) can appear on your credit report for a number of reasons.
Lenders may access your credit report for a number of reasons without your explicit permission. Most commonly, this is to check if you qualify for an offer of credit. Credit card issuers and personal lenders that market their products via direct mail will use this information to target their offers to applicants who are likely to be interested in the offer and be approved.
If you’re having your credit reviewed as part of a background check, perhaps for a job, this typically also appears as a soft inquiry. Note that if you’re turned down for employment because of information in your credit report, they should provide you with a notice of adverse action explaining why.
An increasingly common source of soft credit inquiries is checking if you “pre-qualify” for certain products, including credit cards, personal loans, or insurance. The pre-qualification allows you to see what you may qualify for without generating a hard inquiry which will lower your credit score.
Most common sources of soft inquires
- Checking your own credit score
- Shopping for pre-qualified credit card offers
- Shopping for pre-qualified personal loan offers
- Pre-screen marketing offers from credit cards / loans
- Employment verification
When does a “hard” inquiry appear on your credit report?
A hard inquiry (“hard credit check” or “hard pull”) basically indicates that you are applying to take on a debt or other financial obligation. A company must explicitly ask your permission before carrying out a credit check that will result in a hard inquiry.
While a hard inquiry most often is for a loan or line of credit, other services, like utility, internet, and phone service providers, will often check your credit history to determine if they will require a deposit. While this shows as a hard inquiry on your credit report, lenders can tell the difference between a hard inquiry from applying for a credit card vs. a new cable provider and treat them accordingly.
Most common sources of hard inquiries
- Mortgage application
- Auto loan application
- Credit card or personal loan application
- Apartment rental application
- New utility service (electricity or gas)
- New phone or internet service
How to dispute a hard inquiry on your credit report?
If you’re checking your credit report and notice a hard inquiry you didn’t authorize, what should you do? While a hard inquiry probably won’t lower your credit score significantly, if you don’t recognize the company making it, don’t ignore it. According to Experian, it could be a sign of identity theft.
If you notice a hard pull of your credit report that you don’t recognize, we recommend disputing it with the credit bureaus it appears on (it may appear on more than one) AND reaching out to the company that made the inquiry to verify its legitimacy.
- FTC Guide on Disputing Credit Report Errors
- Dispute a Credit Report Error at TransUnion
- Dispute a Credit Report Error at Experian
- Dispute a Credit Report Error at Equifax
If you’re having difficulty getting traction with the bureaus or company, you can also file a complaint directly with the CFPB (Consumer Financial Protection Bureau), which most companies take seriously and will investigate and respond to within 15 days.
If you believe someone fraudulently applied for credit using your information, you should consider filing a police report to document it and filing a freeze on your credit file to reduce the chance of misuse in the future.
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photo: Mari Lezhava on Unsplash