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Woman With Credit Cards

Soft Credit Pull vs. Hard Credit Pull: How Do They Affect My Credit?

In a sense, your credit report is sort of like your resumé; a black and white document representing a history of your experience that must be provided when you attempt to apply for something.  However, unlike a résumé, where one is likely to omit any “unsavory” details, the credit report reveals it all, even the dirt.

There are so many situations that call for a credit pull, and sometimes you may not even know it is happening!   Any time I’m filling out any sort of application or information sheet, if I see a spot for my social security number, my first question is “Will you be pulling my credit?”  If so, my next question will be, “Is it a soft pull or a hard pull?”

Hint: you want the answer to be “soft!”

Soft Credit Pulls

In a nutshell, this is when your credit is pulled but it does not affect your credit score.  In many cases, you may not even be aware when a soft pull on your credit occurs.  When someone other than yourself performs a soft credit pull on you, they only get basic information such as your name, address, credit score, and bankruptcies or bad loans.

Following are some examples of soft credit pulls, however, be sure to read the disclaimer at below*:

  • When you check your own credit
  • What creditors do before sending you pre-approved credit offers (aka junk mail)
  • Employers, as part of your background check
  • CURRENT credit card or insurance companies, to check up on you

Hard Credit Pulls

Conversely, a hard credit pull is one that will ding your credit score.  Generally, one hard credit pull will lower your score about five points for around six months.  However, hard inquiries remain listed on your credit report for one to two years (depending on the credit agency.)  In addition to the basic information from a soft pull, a hard pull also includes detailed lists all of your open loans and credit lines with the payment history of each; prior credit facilities that have since been closed are often listed as well.

Following are some examples of hard credit pulls, however, be sure to read the disclaimer below*:

  • Banks, when opening a checking or savings account
  • Applying for credit cards
  • Loan applications (mortgages, refis, car loans, personal loans, etc.)
  • New wireless service
  • New utilities service
  • New service for cable, internet, etc.
  • Applying for insurance
  • Home or apartment rental application

As mentioned above, one pull doesn’t affect your score significantly, but it’s important to avoid having several within a short time period, as this can make a noticeable difference.  The reason the credit agency sees multiple hard pulls negatively is that it could potentially be a sign of someone with cash flow problems, thereby representing a risk to creditors.

For example, if you’re shopping for a car loan, it’s okay to let the dealer and a few different banks make a hard credit pull for a car loan within a period of two to four weeks. So feel safe shopping around for the best rate on a loan, mortgage or credit card. Just as long as you don’t draw out the process too much. -NatalieMac.com

Be Careful

Resist opening store credit cards just to save the extra 10%, especially right before you plan to apply for a mortgage or car loan.  Also, if you’re rate shopping for a mortgage, refi, or car loan, pull your credit yourself ahead of time (soft pull) and ask the lender to give you a hypothetical rate based on the score you tell them; otherwise you’ll get a hard pull each time you price the loan.

You should also ask the lender if giving them a copy of your own credit report would suffice.  This avoids the penalty of shopping your credit around and losing points for each pull.

*Disclaimer:  The examples are listed in the category in which they most commonly fall, but there are exceptions in almost every case.  For example, a landlord could do a soft or hard pull, as could banks when opening a checking or savings account.  Always ask ahead of time to be sure.

 

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