What is a Soft Credit Check?

Unlike hard credit inquiries, a soft inquiry made on your credit won’t show up on your credit report and isn’t reflected in your FICO score!

You’ve probably heard of blank checks: That’s a check without any amount written on it, so the person who is going to cash it can put down any number they want. It’s commonly used in the film business to indicate that a director was allowed to make a very expensive passion project.

But have you heard of credit checks?

Oh, you have? Well, do you know the difference between hard credit checks and soft credit checks?

You don’t? What do you want?

You want to see a GIF of a dog watching Youtube videos? OK, fine.

Satisfied? Good, because there are other readers who do want to learn about credit checks. Get out of here. Shoo!

Great, now that it’s just the readers interested in learning about credit checks, we can get to it.


Credit checks: what are they?

When you apply for a personal loan or credit card, your potential creditors will want to know how likely you are to actually pay that loan back. That’s why they’ll perform a credit check before deciding whether you qualify for a loan.

When a company or an individual performs a credit check, they’ll get a copy of your credit report. Your credit report has information about your previous credit history, your current amounts owed, accounts that have been turned over to collections, and previous credit checks.

These reports are compiled by the three major credit bureaus: TransUnion, Experian, and Equifax. The information on those reports is also how your credit score is compiled.

In addition to potential creditors, you may have to undergo a credit check when interviewing for a new job or applying for an apartment. It’s important to be aware of all of this because a credit check can temporarily ding your credit score.

Credit checks: What are the two kinds?

While some credit checks will have a negative effect on your credit, not all of them will.

“Soft credit checks are also known as passive credit checks,” explained Todd Christensen, education manager for Money Fit by DRS, Inc. (@MoneyFitbyDRS). “On your credit history, they might be listed under the ‘Account Reviews’ or the ‘Promotional Inquiries’ sections, depending upon the consumer reporting agency.

“Whereas a hard inquiry is generated when a creditor checks your credit report as part of a credit application process you have begun, a soft inquiry often happens without your knowledge, at least until you check your credit. Soft inquiries, like hard inquiries, remain on your credit for about two years. Soft inquiries have absolutely no effect on your credit rating.”

Because hard credit checks, especially many in a row, can drag down your credit, it’s important not to go applying for things that will trigger a hard credit check without putting some thought behind it. If it involves a soft credit check, on the other hand, then you don’t really need to worry. So it’s worth figuring out what kind of credit check you’d be dealing with before undergoing one.

Credit checks: Can you avoid them?

Legally, a potential creditor, landlord, or employer can not perform a credit check without your agreement. Of course, sometimes illegal things happen, so it’s a good idea to keep an eye on your own credit report so you can dispute any hard credit checks that might show up that you did not agree to.

Not sure how you can check your credit report? You can go to AnnualCreditReport.com once a year to get one free copy of your credit report from each credit bureau. (That’s a total of three free reports per year!) Don’t use any other site, as it could be a scam. And looking for errors is an important reason to check your credit report, but it isn’t the only one.

While you theoretically can avoid ever going through a credit check, it would be difficult to live your life that way. Unless you’re okay with paying for everything in cash, you’ll probably be more or less forced into undergoing a credit check at some point.

However, if you’re applying for bad credit loans—like installment loans—there’s a good chance that the lender will only be running a soft credit check. Meanwhile, many no credit check loans—like payday loans, title loans, and cash advances—don’t require any kind of credit check at all.

(And while that might seem like a good thing, there are certain risks to taking out a storefront or online loan from a lender who doesn’t check your ability to repay.)

If you don’t want any credit checks—even soft ones—being run on your history unless you expressly consent to them, there’s a way to address that.

“You can opt out of all promotional inquiries for five years at OptOutPreScreen.com or by calling 888-567-8688,” advised Christensen. “If you want to opt out permanently, you can use the online form at the same website but will need to send it by mail.”

Hopefully, this has given you a better understanding of what credit checks are and how hard credit checks and soft credit checks work. Now you can go join the dog GIF watchers who left earlier. Seems like a fun time!

To learn more about managing your credit score, check out these other posts and articles from OppLoans:

Do you have a  personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Author and Accredited Financial Counselor®, Todd R. Christensen, MIM, MA, is Education Manager at Money Fit by DRS, Inc. (@MoneyFitbyDRS), a nationwide nonprofit financial wellness and credit counseling agency. Todd develops educational programs and produces materials that teach personal financial skills and responsibilities to all ages. Having facilitated nearly two thousand workshops since 2004 on the fundamentals of effective money management, he based his first book, Everyday Money for Everyday People (2014), on the discussions, tips, stories and ideas shared by the tens of thousands of individuals and couples in attendance.

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.