Not too long ago, I switched to a different Internet provider. When I called to set up my account, the customer service rep asked for my Social Security number. I wondered why it was needed, and he told me that they would be checking my credit. “Is this going to be a hard pull?” I asked. He assured me that it would only be a soft credit pull, and wouldn’t ding my credit score. I allowed the credit check and moved on with the switch. Not only was this a good reminder that sometimes your credit score matters even when you aren’t borrowing, but it was also a good reminder that it helps to understand the difference between a hard credit pull and a soft credit pull.
Hard Credit Pull vs. Soft Credit Pull
Hard Credit Pull
A hard credit pull, or a credit inquiry, is one that is performed when you attempt to open a new line of credit. When you apply for a loan (including a credit card), your credit report and score are checked. On top of that, it is recorded in your credit report as an action that indicates that you are looking to open more lines of credit. In such cases, your credit score is impacted because your desire to open more credit is an indication of your credit habits.
Lenders aren’t the only financial service providers that perform hard pulls, though. Even though my Internet service provider only does soft credit pulls, some utility providers will perform a hard credit pull. Additionally, some banks will check your credit (with a hard pull) when you apply for an account. So you know what to expect, ask before giving your permission for the credit check. If you don’t want a hard pull, you might need to apply elsewhere for an account.
One of the concerns that savvy borrowers have is that they could end up with multiple hard pulls if they are shopping around for a good mortgage rate or a good car loan rate. The good news is that this is accounted for. Each inquiry will appear on your credit report, but all inquiries for the same type of loan product made within 14 to 45days of each other are counted as one inquiry (the exact length depends on the credit bureau). It makes sense, if you’re shopping around for the best loan rate, to do so within a short period of time.
A hard pull remains visible on your credit report for up to two years, but it should only affect your credit score for the first year that it is on your report.
Soft Credit Pull
A soft credit pull, on the other hand, doesn’t impact your credit score, although it does appear on your credit report. Soft pulls include such inquiries into your credit as:
- When you look at your own credit
- When a creditor checks your credit for “prescreened” offers (you didn’t request the credit check)
- When an employer checks your credit report
- When utility companies, banks or others check your report and tell you it is a soft pull
One of the problems you might run into, though, is that some companies will tell you they are performing a soft pull, and then report it as a hard pull. If this happens, you can request that the company change the way it appears on your credit report so that your score isn’t impacted. Make sure you record the information about the conversation you have so that you have some evidence that the person you spoke to promised that it would be a soft pull.
The Bottom Line
The type of inquiry that a company does on your credit matters. A hard inquiry will impact your score. It won’t be a huge impact, but if you are in the area between good and fair credit, it can be enough to bump you down a little bit. Check with service providers to find out whether they are performing a hard pull or a soft pull before you allow them to check your credit.
Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own blog at Miranda Marquit.