Hard vs. Soft Credit Checks: The Impact to Your Credit Score

Credit Check

Understanding the fundamentals of how your credit score is determined, and what impacts it, are crucial learnings toward financial literacy and success. One of the top influencers on your credit score is your recent activity related to credit checks. Credit check activity makes up 10% of your credit score, with hard inquiries lasting a minimum of two years, potentially indefinitely. These hard credit checks can also ding your score by 5 to 10 points. Recognizing the impact of credit checks and understanding when to allow hard or soft checks to be conducted, could save your score.

What is a Soft Credit Check?

A soft credit check, also referred to as a soft inquiry, is as it sounds – not detrimental to your credit score. These checks, or inquiries, do not impact your score in any way. They also do not appear on your credit report. A soft credit check is a key indicator in determining your creditworthiness. They are also used to narrow down what financial are available to you or to confirm your identity. Above all, they do not indicate that you are seeking new credit.

When a Soft Check Is Performed

A soft credit check is usually performed for one of the following reasons:

  • If a potential employer or landlord needs to conduct a background check
  • Checking pre-approval status for a credit card offer
  • When you check your own credit report using a tool such as CreditVerify
  • Applying with LoanConnect for tailored personal loan offers

What is a Hard Credit Check?

A hard credit check, also referred to as a hard inquiry, is more impactful to your overall credit score. A hard inquiry is more thorough than a soft inquiry and is usually conducted to determine your eligibility for a new loan or credit card.

Your credit report displays all hard credit checks and indicates to creditors that you are applying for new credit. As mentioned, these hard checks remain on your credit report for a minimum of 2 years and can impact your score by 5 – 10 points. Too many hard credit checks in a short period of time may also negatively impact your likelihood of loan approval. Some lenders will choose not to work with potential borrowers with too many checks.

When a Hard Check Is Performed

A hard credit checks is usually performed by lenders and other financial institutions for the following reasons:

  • Applying for an unsecured loan, line of credit, mortgage, auto loan, or new credit card
  • Completing your application with a lender after receiving tailored options from LoanConnect

Note: A financial institution or lender will indicate through the application process whether or not they are doing a hard credit check. Be sure to read the terms, conditions & any required consent.

When Should You Allow Hard Checks?

Hard credit checks are almost always performed as the last step before approval. Allowing these checks to be performed is usually non-negotiable if you want to move forward in the process with a lender or financial institution. The important thing to remember is not to allow too many hard checks within a short period of time. As well as not to apply for credit when you aren’t actually in need.

In order to avoid too many checks, do your research before applying for a loan or credit card. You can use your credit report to better understand your current financial position. Using your specific information, such as credit score, will allow you to analyze the loan or credit offer compared to your personal eligibility of approval. If you have fair credit, and the lender works with excellent credit, you are unlikely to be approved. This would indicate that the hard credit check should likely not be conducted to see your eligibility for that offer. As well, narrow down your applications as much as possible. Multiple hard inquiries, even if all offers are viable, may further decrease your credit score.

LoanConnect can help you as our single application checks to see eligibility with multiple lenders without conducing a hard credit check.

Picking the Right Lender(s)

If you think multiple lenders may be right for you, start with one or two, and only continue applying if you are not approved. Loan search engines like LoanConnect can be great as the pre-approval process helps to narrow down your choices. When you apply with LoanConnect, your soft credit check allows us to match you with lenders who have a higher chance of approving you. You can then evaluate each loan option, including rates and terms. The process has no impact on your credit, unless you choose to move forward with a lender.

Credit checks are a key influencer to your overall credit score, but not the only factor. Ensure that you understand what other metrics impact your overall score. Read more about the determining factors of your credit score, here.


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