Credit Check: Hard Pulls vs. Soft Pulls
Most of us think of credit checks as this amorphous thing where the person or entity checking our credit puts in our name and other private information and gets this number along with everything we’ve ever done wrong financially. It sounds so foreboding and basically, really not very interesting. But, it’s a little known fact that there are actually two kinds of credit checks: Hard pulls and soft pulls. Today, we’re going to talk about the difference between these checks.
Soft pull- This is your basic inquiry of your credit score. In short, it’s meant for informational purposes only. The yearly free credit inquiry that the US government provides for the individual consumer (i.e. YOU)? A soft pull. The one financial institution I am with provides me with my FICO score monthly, and thankfully, this is also a type of soft pull. This is you getting information about your own credit so you can know what to do to improve it or to know what you qualify more in general. You know how companies send you pre-approved loan and credit card applications? They know your credit is good because of soft pulls. Your employer or your landlord can also do soft pulls in order to find out more information about you before they hire you or allow you to rent from them. Also, if a financial institution only is looking to verify what you’ve already said about your credit, they can do a soft pull. These inquiries do not show up on your credit report.
Hard pull- These are the big, complicated reports that get done when you apply for a loan or mortgage. Well, or a myriad of other things. AT&T and Verizon do hard pulls for new phone plans. Many banks do them for checking and savings accounts. Comcast does them for new accounts. Some financial institutions even do them when you change your address! The bad thing about this is that hard pulls can affect your credit score.
The first one or two don’t really do anything, but after a while, it will affect your credit score. Think about it, if you’re opening multiple accounts that require multiple hard pulls, you’re spending a lot more money. If you are already paying on several accounts that you have recently started, how do they know that you’ll be able to continue your payments on another new account? Needless to say, this is only 10% of the total calculation of your credit score, so unless the amount of hard pulls you do is absolutely absurd, it’s not going to destroy your credit.
On the other hand, you are allowed and expected to shop around for loans and/or credit cards, and in this process may experience extra hard pulls on your credit. If this is the case, the credit report also takes into account the amount of credit that you are using. Some of those hard pulls you probably didn’t take during the shopping around process, and the person looking at your report will be able to see that as well.
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