When you make a purchase that requires an inquiry into your credit score, or you apply for a loan, the company you are dealing with will do either a hard credit pull or a soft credit pull. It’s important to understand the difference as a hard credit pull will have an effect on your credit score to one degree or another.
What is a Hard Credit Pull?
This type of credit inquiry typically happens when you actually apply for some type of credit. This could be a personal loan, a home mortgage, or even a car loan.
As mentioned, a hard credit pull will affect your credit score. In fact, every time one takes place, your score can drop a few points. This type of pull can stay on your credit report for up to two years. That means if you have very many of them during a two year period, you can expect to see your credit score drop significantly.
A hard credit pull take can as much as five points off of your FICO score and up to twenty points off of your VantageScore. VantageScore is FICO’s competitor.
The good news is that both VantageScore and FICO score have what is called a shopping window. That means if you are shopping for a good interest rate for a car loan, for example, and you apply at three different places, such as a bank, a credit union, and the car dealership, as long as you apply within the shopping window, all of the inquiries will only count as one hard credit pull.
FICO has a 45-day shopping window while VantageScore’s window is shorter.
A few points off of your credit score might not be a major issue if you have really good credit, but if your credit is borderline to begin with, this type of hard credit pull can do serious damage and drop you to a credit score that no longer allows you to be approved for a car loan or mortgage.
It is also important to know that The Fair Credit Reporting Act determines who can make a credit inquiry and whether or not they are allowed to make a hard credit or soft credit pull. That means, if you ask the company making the inquiry what type of credit inquiry they do, they should be able to tell you.
What is a Soft Credit Pull?
A soft credit pull is one done by a credit card company that wants to send you an offer to sign up for their card. Prospective employers sometimes do a credit inquiry as well before offering you a job. This is also a soft credit pull.
What is important to know about a soft credit pull is that it does not have an impact on your credit score, so you don’t need to fear this type of credit inquiry.
Finally, if you want to check your own credit score, this also falls under the soft credit pull, so don’t let your concern over a hard credit pull keep you from checking on your credit from time to time.
There are cases when a credit inquiry can fall under a soft or hard credit pull. This can happen under the following situations:
1.) Applying for internet service
2.) Renting an apartment
3.) Opening a bank account
4.) Having your identity verified
If you are dealing with one of these situations be sure to ask what type of credit inquiry they perform before you allow one to take place.
There are times that a hard credit pull is required, and you shouldn’t be afraid of them as long as there is a good reason for the inquiry. Just keep in mind the shopping window, and don’t apply for a credit card unless you really need it.
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