Credit Inquiries 101: A Complete Guide to a Hard vs. Soft Pull

When creditors are deciding whether or not to offer you a loan or a credit card, they look at a copy of your credit report and consider your credit score. Your credit score is a number that quantifies your payment history, current credit, how long your credit has been established, and a few other variables.

One of those variables happens to be the last time you’ve sought out new credit. Certain inquiries into your credit report can lower your score by a few points. Which types of inquiries might hurt your score, and how much will those inquiries affect your score? Let’s find out:

A Soft Pull Won’t Harm Your Score

A soft pull, also known as a soft inquiry, is an inquiry that won’t harm your credit score. Oftentimes, you won’t even be aware that a company is making these inquiries. If you receive a solicitation for a pre-approved credit card in the mail, the creditor has probably done a soft pull on your credit report to make sure that you qualify. The same is true for pre-approved mortgages and refinance offers.

Employers often initiate soft pulls to get an idea about how responsible a potential hire might be, and credit card companies frequently initiate soft pulls in order to check up on their cardholders.

Banks also use soft pulls when a customer opens an account in order to verify the identity of the new account holder. When you check your own credit report, you do so through a soft pull.

(While we’re on the topic, you should check your credit score and report at least once each year, and you should always make sure to check it for fraud or inaccurate information.)

A Hard Pull May Harm Your Score

Whenever you’re seeking a new line of credit—be it a home loan, car loan, home equity loan, or credit card—the prospective lender initiates a hard pull of your credit. This credit check stays on your record. It will also lower your score by about five points for the next six months.

The good news is that most credit scoring models record multiple applications for the same transaction as a single hard pull. For example, let’s say you apply for a home loan through several lenders all in a single day. Credit scores account for the fact that you are only seeking one line of credit in the end. So, while you may apply to many lenders, your credit score will only be hit with a single hard pull, and you should be able to maintain your good credit score.

Because a hard pull lowers your score, even temporarily, it’s important to guard yourself against too many hard pulls.

For example, you might frequently receive offers at store checkouts such as: “Sign up for our store credit card and receive 20% off your purchase today!” While these deals may seem enticing, understand that signing up will result in a hard pull of your credit, and will thus lower your score for months. Some banks (e.g., Ally Bank) even use hard pulls when you open new accounts, so make sure you know the bank’s policy beforehand.

Always be particularly careful about the number of hard pulls conducted in the months leading up to applying for a major loan, such as a mortgage. You want to give yourself the best chance of obtaining the loan at the best mortgage rate possible.  Hard pulls won’t kill your credit, but be smart and avoid them if you can.