Anytime a bank or lender checks your credit, a log will be reported on your credit report. This is due to the fact that multiple credit checks over a short period of time (less than 1 month) can raise a red flag to lenders and anybody else that could be interested in your credit score.
Institutions that check your credit can either perform a hard credit check or a soft credit check. A hard credit check is also known as a hard inquiry or a hard pull. A hard credit check can have a heavy impact on your report and credit score.
Soft checks are harmless to your credit report and do not affect your credit. No matter how many soft credit checks are performed on you, they will not affect your credit. There are a few ways you can tell the main differences between a hard credit check and a soft credit check.
When a lender checks your score, a log will remain in your report that shows who the lender inquiring about your score was and for what reason. Anytime a lender is attempting to loan you money, they will perform a hard credit check. A hard inquiry will also remain on your credit report.
Not all credit inquiries are performed by banks and lenders though. Often times, you might be checking your own credit score, which can show as a soft inquiry on your credit report. If you are looking to rent an apartment, a landlord or property management company may be trying to check your credit to see if you are a responsible lender.
All of your borrowing and lending activity is followed by the 3 major credit bureaus: Equifax, Experian, and TransUnion. The 3 bureaus collect data and information related to your borrowing to produce a 3 digit score that tells the lender how “creditworthy” you are.
When your credit score is high, so is your chance of getting approved for a lower interest loan. Whether its a car loan, mortgage, or personal loan, a lender will go through your credit report or score to determine if you are able to repay them.
Potential employers are also known for checking credit reports and scores when hiring. All of these examples are soft credit check situations. All credit checks ( hard and soft checks) are logged by the 3 major credit bureaus for at least 2 years. Having a hard credit check performed can actually slightly lower your credit for around 1 year.
For most people with an established credit history and solid repayment records, a hard check should not affect your credit score too heavily. If you are a younger borrower with a shorter credit history, a hard check may have a larger impact on you.