Anybody handling their money, asking for loans, or renting a house has to know the difference between a soft and hard credit check. This issue often raises several common questions, like "Do credit checks affect your credit score?" or "How long does a hard inquiry stay on your credit report?"
Understanding the principles of these credit checks can enable you to guard your credit and make wise financial choices.
To help you with that, today's article will define soft pull credit, hard inquiry, and how each of them influences your credit score. We will also discuss the differences between soft and hard pulls and provide advice on how to guard your credit during hard pulls.
Whether you rent, borrow, or simply want information, this article will equip you to negotiate credit checks properly. Scroll down now!
Quick Facts About Soft and Hard Credit Checks
What Is a Soft Credit Check?
It’s time to learn more about the differences in definitions of soft and hard credit checks. First, let’s talk about soft credit checks!
Definition and Common Uses
A soft credit check, or a soft pull credit, is a kind of a credit inquiry that has no impact on your credit score. It is usually utilized for informational rather than decision-making reasons. This is also the kind LeaseRunner uses for tenant screening purposes.
In certain circumstances, including when businesses check your credit to pre-approve you for offers or when you check your own credit report, soft pulls can be established without your explicit authorization.
Common uses of soft credit checks include:
- Checking your credit score or report.
- Pre-approval offers for credit cards or loans.
- Background checks by employers.
- Insurance premium quotes.
- Tenant screening by landlords
Because soft pulls do not impact your credit score, they are a safe way to monitor your credit or be screened without risk.
Scenarios for Soft Credit Checks
Imagine you want to see your credit score via the app of your bank or a tenant screening website like LeaseRunner. Your credit won't be affected by this soft credit pull. Similarly, a credit card issuer has most certainly done a soft pull if they give you a pre-approved offer.
Soft credit pulls are also used by landlords to screen renters without affecting their credit ratings, therefore facilitating their application to many properties without consequence.
What Is a Hard Credit Check?
To distinguish significantly between soft and hard credit checks, it’s necessary to know the basics of hard credit evaluation right here.
Definition and Impact
When a lender or corporation looks into your credit record in relation to a loan decision, it is known as a hard credit check (or hard inquiry). Usually resulting in a modest decrease of 5 to 10 points, this kind of investigation calls for your authorization and might compromise your credit score.
All lenders can see hard inquiries on your credit report, which stay there for up to two years.
Scenarios for Hard Credit Checks
Hard inquiries typically occur when you:
- Apply for a credit card.
- Apply for a mortgage or auto loan.
- Open a new utility or cell phone account.
- Rent a property that requires a full credit check.
- Request a credit limit increase (sometimes).
Multiple queries in a short time might make lenders wary of hard inquiries, indicating you are looking for additional credit, consequently reducing your chances of acceptance.
How Do Credit Checks Affect Your Credit Score?
Soft Credit Checks
Soft credit pulls or inquiries do not affect your credit score at all. You can check your own credit as often as you want without any risk. Employers and landlords often use soft pulls to screen applicants without harming their credit.
Hard Credit Checks
Hard credit checks can cause a small, temporary dip in your credit score, typically between 5 and 10 points. The impact lessens over time, with most scores recovering within a few months if no additional hard inquiries are made. However, multiple hard inquiries in a short period can compound the effect and may signal risk to lenders.
Soft Pull vs Hard Pull: A Detailed Comparison
Managing your credit depends on knowing the difference between a soft and hard credit check. Here is a side-by-side comparison:
How Long Do Hard Inquiries Stay on Your Credit Report?
Hard inquiries remain on your credit report for up to two years. However, their effect on your credit score usually diminishes after about 12 months.
When shopping for loans like mortgages or auto loans, multiple hard inquiries within a short window (usually 14 to 45 days) are often treated as a single inquiry by credit scoring models, minimizing the impact.
How Credit Checks Impact Your Leasing Application with Leaserunner
When you apply for a lease through Leaserunner, we may conduct a soft pull credit check using the VantageScore 3.0 model to assess your creditworthiness.
Unlike a hard inquiry, which occurs when you apply for a credit card or loan, a soft pull does not affect your credit score. This means that when you apply for a lease, you don’t have to worry about a significant decrease in your credit score due to our credit check.
Additionally, you don’t have to unfreeze your credit file using LeaseRunner for tenant screening services.
When Is a Soft Credit Check a Good Option
Benefits for Tenants
A soft pull credit lets landlords evaluate tenants without damaging their credit records. This lets renters apply to many homes without worrying about several hard inquiries damaging their credit.
Benefits for Landlords
Soft pulls let landlords evaluate tenant creditworthiness fast and motivate more applications. If a closer credit evaluation is required, they could choose a hard pull. All in all, soft pulls are still a less invasive first step.
Hard Credit Checks: When Are They Necessary?
Hard credit checks are necessary when a lender or company needs a full view of your credit history to make a lending decision. This includes:
- Mortgage and auto loan applications
- Credit card applications
- Certain rental applications
- Requests for credit limit increases
These inquiries help lenders assess risk, but should be used judiciously.
How to Protect Your Credit During Hard Pulls
Hard credit inquiries could somewhat lower your credit score, therefore, you should control them carefully. Here are important strategies to protect your credit during hard pull times:
Ask if the Credit Check Is Soft or Hard
Find out from the lender if a soft pull or a hard inquiry will be used before applying. Soft pulls don't affect your score and are better for pre-approvals or casual checks.
Limit uses to what you really need
Apply only for credit when absolutely necessary. Many applications in a short period of time might indicate financial risk to lenders and lower your credit score. Be selective to prevent pointless probing queries.
Shop for loans within a short window
Rate searching for auto loans or mortgages should be done within a 14 to 45-day range. Credit scoring models usually count multiple hard inquiries in this window as one, minimizing impact.
Frequently check your credit score
Review your credit reports from Equifax, Experian, and TransUnion regularly for illegal hard inquiries. Early detection protects your score and helps you contest fake pulls.
You may minimize the effect of hard pulls and maintain good credit by limiting applications, scheduling your loan shopping, monitoring your credit, and specifying types of inquiries.
Final Thoughts
Knowing the difference between a soft and hard credit check helps you protect your credit score. While hard pulls might momentarily reduce your score, soft pulls are harmless and helpful for background checks and pre-approvals.
Therefore, always ask what type of check will be performed and limit hard pulls to essential applications. This information helps you control your credit so as to prevent surprises. If you need more helpful information on this topic, feel free to visit the LeaseRunner blog anytime.
FAQs
Q1. Can I rent an apartment without a hard credit check?
Some landlords use soft pulls for tenant screening. Always ask before applying.
Q2. What is a hard inquiry?
It’s a hard pull done when you apply for credit products, which may lower your score slightly.
