Soft Credit Check

Soft Credit Check
A soft credit check—also known a soft inquiry or soft pull – is a way to obtain information from a person’s credit report without impacting their credit score. Unlike hard inquiries, which are recorded on your credit report and can negatively affect your score, soft inquiries do not require an individual’s authorization before they can be run.

What is a Soft Credit Check?

A Soft credit check is one of two kinds of credit checks, the other being a hard credit check. These are also sometimes referred to as “credit inquiries” or “credit pulls.”

What is a credit check?

A credit check is an action wherein a person or institution checks a person’s credit history and credit score in order to assess their creditworthiness. Credit checks are routine when applying for a loan or line of credit, and their creditworthiness could determine whether or not they are approved for the loan and what kind of credit they can get. However, credit checks can also be run other situations, such as when a person is applying for a job or an apartment.

What is difference between a hard credit check and a Soft Credit Check?

A hard credit check allows the person or institution making the inquiry to view a full copy of a person’s credit report. On the other hand, a soft credit check will only return a basic overview of a person’s credit report.

Soft inquiries also don’t require the authorization of the person who’s credit history is being pulled, whereas hard inquiries do require authorization. Because soft credit inquiries can be run without this authorization, they are run far more frequently than hard inquiries.[1]

A common situation where a soft credit inquiry might be run is when a credit card company is sending out pre-approved credit card offers. They will run a soft check to make sure that a person might qualify for their product before extending an offer to them. Soft credit inquiries can be run on a person’s credit history without them ever knowing.[2]

Is a Soft Credit Check recorded on my credit report?

The short answer is “no.” But it’s not quite that simple.

Soft credit checks are recorded on a person’s credit report. However, they are only viewable when the owner of said credit report requests a copy. If another party, such as a lender or a landlord submits a hard inquiry on your credit history, they will not be able to view your soft inquiries.

Hard inquiries are recorded on a person’s credit report and can be viewed by anyone who views said report.

Does a Soft Credit Check affect my credit score?

No. A soft inquiry will never affect your credit score.

This is one of the main ways in which soft credit checks are different from hard checks. Since hard credit inquiries are most often run when a person is applying is applying for a loan, they are seen as requests for more credit. Too many requests for new credit within a short period of time can be seen as a sign that person is not handling their current credit load responsibly. As such, the hard inquiry causes their credit score to go down.

According to experts at FICO, a borrower with six or more hard credit inquiries on their report is up to eight times more likely to file for bankruptcy than someone with no inquiries.[3] According to those same experts, a hard inquiry can cause a decrease in your credit score of up to five points.[4]

The one exception for hard credit inquiries is when a person is applying for a mortgage, auto, student loan and is shopping around for the best rates. In situations like these, the credit bureaus will bundle all these inquiries together so that they only count as a single inquiry.

In what situations will a Soft Credit Check be run?

A soft credit check will be run when you are applying for an apartment or job, or when a credit card company is deciding whether or not to send you a pre-approved credit card offer. A soft inquiry will also be run if you check your credit score through a website like CreditKarma.com or CreditSesame.com.[5]

Hard credit checks are usually run when you are applying for a loan, line of credit, or credit card. They can also be run as a part of some rental applications.

What are a credit report and credit score?

A credit report is a document that compiles a person’s credit history. Credit reports are created by the three main credit bureaus—Experian, TransUnion, and Equifax—and generally go back seven years. These reports contain information on what kinds of credit a person has used, how much they have owed, their history of on-time payments, their history of hard credit inquiries, whether or not they have ever filed for bankruptcy, etc. They are compiled using information from lenders, debt collectors, landlords, utilities companies, and the public record.

Under the Fair Credit Reporting Act (FCRA), you are entitled to request one free copy of your credit report per year from each of the three credit bureaus. Since credit reports can and do contain errors, it is a good idea to check your credit report regularly.  To receive a free copy of your credit report, go to www.annualcreditreport.com. To dispute an error on your report, consult this helpful guide from the Federal Trade Commission (FTC).

A credit score is a numerical grade that’s based on the information in a person’s credit report and expresses that person’s overall creditworthiness. The most common type of credit score is the FICO score (created and owned by the FICO company). FICO scores are expressed on a scale from 300 to 850; 850 is the best possible score and 300 is the worst.

References:

  1. “Soft Inquiry.” Investopedia. Accessed December 2, 2016 from http://www.investopedia.com/terms/s/soft-inquiry.asp?lgl=no-infinite
  2. “Hard Inquiries and Soft Inquiries.” Credit Karma. Retrieved December 2, 2016 from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries
  3. “The Difference Between Hard and Soft Credit Inquiries” TransUnion.com. Accessed December 2, 2016 from http://blog.transunion.com/the-difference-between-hard-and-soft-credit-inquiries/
  4. “What are inquiries and how do they affect my FICO score?” MyFico.com. Accessed December 2, 2016 from http://www.myfico.com/crediteducation/questions/inquiry-credit-score.aspx
  5. Lee, J. “The Difference Between Hard and Soft Credit Inquiries.” U.S. News and World Report. Accessed December 2, 2016 from http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries