How is Your Credit Affected by Hard Pulls vs. Soft Pulls?
Any time your credit report is checked, it can either be categorized as a “soft pull” or a “hard pull”. The same information can be obtained either way, but one has a much bigger affect on your credit. Understanding the difference between the two inquiries will help you answer a few crucial questions.
Who should I let pull my credit report?
When should I allow my report to be pulled?
What impact did this inquiry have on my credit score?
Soft Credit Pull
A “soft pull” refers to a credit report inquiry that does not negatively affect your credit score. This type of inquiry is often done without your knowledge and without your permission.
Credit card companies often use soft pulls prior to sending pre-approved credit card offers to ensure that you are qualified.
Other inquiries that are usually soft pulls:
- You obtain your own credit report
- Employers are doing a background check
- Preapproval for a mortgage loan
- Banks verifying your identity
- Credit card companies keeping an eye on you
A soft credit pull is nothing to concern yourself about, in regard to the impact it has on your credit. It’s often done involuntarily; therefore you’re not held responsible for how often it happens. If at any time a reputable person or company needs access to your credit report and offers to do a soft pull, you would be okay to allow it.
Hard Credit Pull
A “hard pull” is a different story. This type of inquiry takes place virtually every time you get a loan or a credit card and it does have an impact on your overall credit score. Wireless phone services, store credit cards and even banks do hard pulls in order to approve you.
Though one hard pull won’t have a very significant impact on your score, multiple inquiries will. A hard pull is calculated into the “New Credit” section of your FICO score, which makes up 10% of your overall score. This type of a pull can stay on your credit reports and affect your score for at least one year.
Avoiding Hard Pulls
Limiting the number of hard pulls you allow in a year can help keep your score up or if nothing else, keep it from dropping. Avoiding hard pulls may take extra effort on your part, but it could help maintain good credit.
Make sure to weigh the benefits of incentive offers on credit cards and store credit against the impact those hard pulls will have on your credit score. A 15% discount off your initial purchase might not be worth the credit points you lose in the long run.
Also, don’t be afraid to ask and shop around. Two companies offering the same product may take different approaches to credit inquiries. If you can find a company that does soft pulls, go with that company/one.
Tedious as it may sound, your credit score is fragile and any step that can be taken to prevent credit score drops is worthwhile.