Hard Credit Check

Hard Credit Check
A hard credit check—also known as a “hard credit inquiry” or “hard pull”—is a type of credit check used to determine creditworthiness. Unlike soft credit checks, hard credit checks can lower your credit score.

What is a Hard Credit Check?

There are two types of credit checks: hard and soft. Both are ways that lenders—as well as landlords, phone carriers, and credit card companies, among others—determine your creditworthiness.

With a hard credit check, the company conducting the check will first need your permission to access your credit report. (Typically, you provide permission at the same time that you apply for their service or product.) Your credit report contains a range of financial information that includes your loan payment history and whether you have any outstanding balances. Based on this information, the company decides how likely they think you are to make payments on time.

What’s the difference between a Hard Credit Check and a soft credit check?

There are two important differences between hard and soft credit checks:

  1. Hard credit checks require your permission, while soft credit checks don’t.
  2. Hard credit checks affect your credit score, while soft credit checks don’t.

By law, companies can view your credit report for a number of different reasons without your permission. (For instance, a credit card company might conduct a soft credit check to offer you a pre-approved card.) These inquiries are recorded on your credit report but don’t affect your credit score.

Hard credit checks, on the other hand, require your permission and can affect your credit score.

When are Hard Credit Checks performed?

Hard credit checks are almost always conducted for loans and credit cards. Sometimes they’re also conducted for apartment rentals, cell phone contracts, or opening a bank account.1 In all cases, you must first provide permission before a company can conduct a hard check on your credit history.

Why does a Hard Credit Check affect my credit score?

Your credit score essentially represents how likely you’re considered to be to make payments on time. If you apply for a lot of loans—and thus have a lot of hard credit checks on your credit report—it might be seen as an indication that you’re in poor financial health.

How many points does a Hard Credit Check take from my score?

The impact of a hard credit check varies from person to person. For most, a hard credit check will cause a loss of no more than five points. However, if you have a short credit history or lots of hard checks, it might drop by more.2

On the other hand, if you happen to be shopping around for the best offers on a mortgage or auto loan, the credit bureaus may combine several hard credit checks into one. Usually they do this for all similar hard credit checks conducted in a 45-day window. This allows you to finish rate-shopping with minimal impact to your score.3

How long will a Hard Credit Check be recorded on my credit report?

Hard credit checks can stay on your credit report for up to two years.4

References:

  1. Credit Karma. (2016, October 19). Hard inquiries and soft inquiries. Retrieved from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries.
  2. Lee, Jenna. (2014, July 24). The difference between hard and soft credit inquiries. U.S. News Money. Retrieved from http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries.
  3. TransUnion. (2014, December 12). The difference between hard and soft credit inquiries. Retrieved from http://blog.transunion.com/the-difference-between-hard-and-soft-credit-inquiries/