Hard Credit Pull vs. Soft Credit Pull: Demystifying Credit Inquiries

Recently, a client of mine looked at me with a hint of concern and asked, “Are you doing a hard credit check on me today?” It dawned on me that this is a question that many of you might have. So, today, let’s delve into the world of credit checks and clear up the mystery surrounding hard and soft pulls.

Before we go to far, at The Richard Woodward Team NEXA Mortgage has the ability to do the hard or soft pull and the decision is initially left up to you, the consumer.  We have the ability to start the process with a soft pull if you like but when you go under contract to purchase a home, then a hard pull is required.  There is a risk here in that your score could potentially change when a hard pull is done which could possibly disqualify you.  My advice, if you buy within the next 90 days, just do the hard pull.

What’s a Credit Pull?

In layman’s terms, a credit pull (or inquiry) is when an entity, be it a lender, employer, or even you, requests to see your credit report. These checks help them assess your creditworthiness and reliability as a borrower or candidate.

The Two Types of Credit Pulls: Hard and Soft

1. Hard Credit Pull (or Hard Inquiry)

What is it? A hard pull is a comprehensive review of your credit report from the three consumer credit bureaus (Experian, TransUnion and Equifax). This type of inquiry is usually done when you’re applying for a significant loan or credit line, such as a mortgage, car loan, or a new credit card.

Does it impact my credit score? Yes, a hard inquiry, for the purpose of a mortgage, can temporarily lower your credit score by up to 5 points for a period of roughly 90 days. However, the impact usually diminishes over time and falls off your report entirely after two years.

However, if you apply with several lenders within a 14–30-day window, it will only count as one pull.  This is not true with credit cards and personal lines of credit.

Is consent required? Absolutely! A lender or entity cannot perform a hard pull without your explicit permission.

Adding to our discussion, let’s delve into some real-life situations where you might encounter a hard credit inquiry:

1. Eyeing a New Credit Card? Every time you fill out that credit card application, brace yourself for a hard inquiry. It’s just part of the process!

2. Thinking of Cruising in a New Car? Whether you’re dreaming of buying or leasing a car, whether via a bank or a dealership, they’ll likely take a detailed look into your credit. Yes, that means a hard pull!

3. Home Sweet Home: The journey of buying a house is thrilling, but remember, when you’re applying for that mortgage, lenders will do a thorough check on your credit with a hard inquiry.

4. Need a Personal Loan? Just like with other significant loans, when you step into the world of personal loans and submit that application, expect the lender to initiate a hard credit pull.

5. On the Hunt for a New Apartment? When renting or leasing a place to call home, the check can vary. Some landlords or companies might do a hard inquiry, while others opt for a soft pull. It’s always wise to ask them upfront so you’re in the know!

2. Soft Credit Pull (or Soft Inquiry)

What is it? A soft pull is a more cursory glance at your credit report. Examples include when you check your own credit score, when credit card companies pre-approve you for offers, or when a potential employer checks your credit as part of a background screening.

Does it impact my credit score? No. Soft inquiries do not affect your credit score, no matter how many times they occur.

Is consent required? Not always. While it’s always better to stay informed, businesses might do a soft pull without your direct consent. However, because it doesn’t impact your score, it’s generally less concerning.

So, to answer the burning question…

If you’ve approached a lender (like me!) to discuss a significant loan, then yes, a hard credit pull may be in the cards for today or when you go under contact – your choice. But rest assured, it’s a standard procedure, and we always ensure to get your explicit consent before initiating any such inquiry. And if you’re ever unsure, always ask. It’s your credit, and you have every right to be informed!

Closing Thoughts

Understanding the nuances of credit inquiries is essential in today’s world, where credit plays such a pivotal role. Stay informed, ask questions, and always be proactive about your financial well-being.

Pro Tip:

When a hard credit inquiry is done, the credit bureaus will sell your data to up to 200 different lenders.  You could potentially receive over 100 solicitation calls from lenders.  To prevent that you might want to opt out of this irritating policy here:  OptoutPrescreen.com