Credit Inquiry: Hard Pull vs. Soft Pull

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If you don’t understand why your credit score is like a roller coaster with ups and downs, you are not alone. You probably wonder what could possibly have gone wrong when it drops instead of rising like you expected. There are a number of factors that affect your credit score such as not using your credit cards or not having credit cards. You might have credit errors on your report and you don’t even know it. Your credit score will have an impact on whether financial institutions will lend you money or not, how much they will lend you, and what interest you will be charged.

Another factor that affects your credit score are credit inquiries. There are different kinds of credit inquiries and while some will improve your credit score others will destroy it. There are two categories that credit inquiries fall into, hard inquiries and soft inquiries. So, let’s take a look and discover what these inquiries are all about.

A Soft Inquiry:

Also referred to as a soft pull, happens when your credit report is checked for a background check or by a mortgage lender for pre-approval. In many cases, employers will do background checks before hiring a potential employee.   In other cases, checks are done to ensure you are who you say you are. These inquiries take place without your knowledge but will not have an affect on your credit score.

A Hard Inquiry:

Also referred to as a hard pull, happens when you apply for a credit card, personal/business loan, mortgage loan or car loan. If you apply for a credit card, the credit company will perform a hard pull to find out the condition of your credit report. If you are approved for a credit card, this information will stay on your report. A hard inquiry can affect your score by approximately 5 points and will stay there for six months. Even though you might think this isn’t much, you should be very careful how many hard pulls hit your report. Think twice about a credit card company’s offer to get you to sign up. Is it worth it?

Too many hard inquiries are going to have a major impact on your credit score. You need to avoid hard pulls in order to have a healthy credit score. Obviously, the better your credit score, the better your interest rates on car loans, mortgages or for a needed future loan.

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How To Stay Away From Hard Pulls:

When creditors see many hard pulls on your report, they will be very leery about offering you credit. It makes you look desperate or were unable to get the credit you wanted earlier on. Numerous hard pulls will make you appear as a high-risk borrower, so keep it down!

The upside, if you are shopping around to get the best deal for a mortgage, some credit scoring platforms will combine multiple inquiries if performed within a certain time frame. It’s advisable that you do your searches in a very timely manner. Credit bureaus usually realize you are comparison shopping by the type of credit you are applying for (i.e. a mortgage loan), and give you anywhere from 14 to 45 days to complete your searches.

Rule of thumb, always stay up on your credit score and only apply for credit that you know you will be approved for. You can’t always avoid credit inquiries and even though they will affect your rating, it’s usually pretty minor. Now, if your score is only fair to good, you want to be even more conscientious in order to improve your score.

What If You Didn’t Approve A Hard Pull?

If you find something on your credit report that you did not authorize, contact the credit bureau either in writing or by calling them and ask them to remove it.

Incorrect information on your credit report can be disputed by directly contacting the credit bureaus. These errors are affecting your credit score, you want to ensure that the information on your credit report is accurate.

Know the difference between a soft pull and a hard pull, know how to avoid too many inquiries and only apply for credit that you will be approved for. If you protect your credit score with a little common sense, you and your report should be fine.

 

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