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Hard Credit Checks vs. Soft Credit Checks: What You Should Know

Milad Hassibi May 21, 2018


If you have been shopping around for a loan, you may have heard the terms soft credit check and hard credit check come up often. Anytime a bank or lender checks your credit, an entry 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. So what’s the difference between a soft credit check and a hard credit check?

What is a Soft Credit Check?

Soft credit checks, also known as a soft inquiry, are inquiries that are made on your credit but do no impact your score at all. They are harmless to your credit report. A soft credit check occurs when you are checking your own credit, renting an apartment, and more.

Employers who check an applicants credit score will also typically perform a soft credit check.A credit report with a hard credit check and a soft credit check

What is a Hard Credit Check?

A hard credit check is performed when a creditor is qualifying an applicant for a hard money loan. A hard credit check occurs when you are looking to get money from a lender, whether for a loan, credit limit increase, or a new line of credit.

A hard credit check is also known as a hard credit inquiry or a hard credit pull. A hard credit check can have a small impact on your report and credit score.

You can expect to receive a hard credit check if you are applying for an auto loan, mortgage, or personal loan. Your score may drop by 5-15 points with a hard credit inquiry.

It’s best to avoid applying for multiple lines of credit in a short period of time, as it can make lenders think you are in a money bind.

However, the 3 major credit reporting agencies also recognize that consumers will shop around for the best rates. If you apply for all of your loans within a 14-day period, all of the hard inquiries will just count as one single hard inquiry.

Difference Between Hard and Soft Credit Checks

A soft credit check will show the same exact information as a hard credit check. This information can include any outstanding loans, lines of credit, and your payment history.

A hard credit check, on the other hand, is mostly used when applying for a new line of credit or a higher spending limit. A hard credit check lowers your score because it signals to other creditors that you are trying to borrow money, and creditors must see that you can handle repaying the loan.

When a lender checks your credit score, a log will remain in your report that shows who the lender inquiring about your score was and for what reason.

All credit checks ( hard and soft credit inquiries) 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.

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.

Get a Car Loan with Any Credit Along with a Happy Couple and a New Black SUV next to them

Potential employers are also known for checking credit reports and scores when hiring. All of these examples are soft credit check situations.

Final Note

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.



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