What Is a Hard Credit Check?

Hard credit inquiries occur when you are applying for new credit and can only be run with your express permission.

No credit check loans can help people with poor credit and meager savings obtain short-term financing when their car breaks down or they find themselves hit with a surprise medical bill. Unlike standard personal loans, these are bad credit loans that don’t perform a “hard” check on an applicant’s credit.

For those who have bad credit, hard credit inquiries are something that they can come to dread, as it often means that their application is about to be denied and their score is going to get dinged even further. If you’re not familiar with the ins and outs of hard credit checks, here’s what you need to know.


Credit scores: an overview.

In order to explain credit checks, it helps to explain how credit scores work in the first place. Your credit score is a three-digit number that summarizes your creditworthiness—basically, how likely you are to meet your financial obligations, whether that be a personal loan, a credit card, a rent check, a mortgage, etc.

The most common kind of credit score is also the oldest: Your FICO score. Created by Fair, Isaac and Company in 1989, the FICO score is graded on a scale from 300 to 850. The higher your score, the better your credit, with 680 being a rough cut-off point for “good” credit.

Credit scores are created using the information from your credit reports. These are documents maintained by the three major credit bureaus–Experian, TransUnion, and Equifax–that track your history as a credit user.  Most of the info on these reports will drop off after seven years, though some information—like bankruptcies, for instance—sticks around for longer.

In addition to the public record, credit reports rely on businesses like banks, credit unions, landlords, and debt collectors to report information. Some businesses do not report to all three credit bureaus, which means that your score can vary slightly depending on which report was used to create it.

There are five main factors used to create your FICO score: payment history (35 percent), amounts owed/credit utilization (30 percent), length of credit history (15 percent), credit mix (10 percent), and recent credit inquiries (10 percent). We’ll talk a little bit more about that last category in the next section.

Here’s how hard credit checks work.

Hard credit inquiries occur when you are applying for a loan, credit card, or other forms of credit. The prospective lender will pull a copy of your credit report to review whether or not your credit application should be approved. Hard credit inquiries can only be run on your report with your express permission.

These hard inquiries get reported on your credit report under the “recent credit inquiries” category. Depending on your credit score, a single hard inquiry could ding your score by five points or not at all. These inquiries stay on your report for two years but generally aren’t included in your score longer than one year.

Why are hard inquiries reflected in your credit score? Well, hard credit inquiries represent a request for new credit. And any request for new credit could mean that you are encountering costs beyond what you could normally afford. While a single hard inquiry might just ding your score, several inquiries within a short period of time will have a greater negative effect.

There is one exception: Lenders and credit bureaus do not want to discourage borrowers from shopping around when applying for a loan. But shopping around means multiple hard inquiries. This is why all credit inquiries within 45 days for mortgage, auto, and student loans are bundled together and counted as a single hard inquiry.

If a business requests permission to run a hard inquiry on your credit, you do not need to grant them permissions. However, it is often the case that declining permission will result in your application being automatically denied. Still, if you do not want that inquiry recorded on your report, the decision is ultimately up to you.

Soft credit checks exist as well.

Have you ever checked your own credit score or received a “pre-approved” credit card offer in the mail? If you have, then that means a soft inquiry has been run on your credit. Unlike hard inquiries, these soft checks do not affect your credit score.

If hard credit checks represent instances where a lender is evaluating your request for more credit, then soft credit checks represent … pretty much any other instance where a credit pull is being requested on your report.

It’s often said that soft credit checks don’t show up on your credit report, but this isn’t exactly true. Soft pulls are recorded on your report, but they are visible only to you, not to any other businesses or entities that might run a credit check. More importantly, soft inquiries do not affect your credit score.

With a soft check, companies will often get a less clear picture of your overall creditworthiness: A solid overview, not a detailed analysis. This is why you can receive a pre-approved offer for an online loan or credit card and then still be denied when you submit an application and a hard inquiry is run.

Unlike hard credit inquiries, soft inquiries can be run with or without your permission. So if you are applying for a new apartment and a landlord runs a soft check on your application, then they don’t need to ask for permission before doing so. However, if the landlord does request permission, then you know it is a hard check.

Some loans use soft credit checks.

If you have bad credit and you’re applying for a loan, you should consider the benefits of a soft credit check loan over a no credit check loan. While neither one of these loans performs a hard inquiry, soft credit check loans do indeed run a soft inquiry when evaluating their loan applications.

Running a soft check allows the lender to determine a borrower’s ability to repay the loan they’re applying for. It’s pretty much exactly the same reason that traditional personal lenders run hard inquiries. If a soft credit check lender determines someone cannot afford a loan, they will decline to lend to them.

No credit check lenders, on the other hand, will approve a loan regardless of whether the borrower can afford it or not. This means that it’s all too easy for no credit check loans to trap borrowers under a mountain of high-interest debt that they have little hope of ever paying off on their own.

Common no credit check loans include payday loans, title loans, and cash advances. Soft credit check loans, meanwhile, most often come in the form of bad credit installment loans. Some soft credit check lenders even report payment information to the credit bureaus; this means that paying your loan off on time could help you build a better credit history.

To learn more about how you can improve your credit, check out these other posts and articles from OppLoans:

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