A hard credit check is when a lender checks your credit before approving you for a loan.
A soft credit check is when someone checks your credit for preapprovals or when you check your own credit.
Hard credit checks can cause your credit score to drop slightly. Soft credit checks don’t affect your credit score.
Hard credit checks happen when you apply for credit, such as a mortgage, car loan, or credit card.
Soft credit checks happen when you receive an offer from a lender, like a pre-approved credit card, or when you check your own credit.
Is Consent Required?
For hard credit inquiries, you must provide explicit written consent for these. For instance, when buying or leasing a car, you’d sign a credit report authorization form, allowing the dealership to pull your credit.
Whereas soft credit inquiries can happen without your direct permission. For example, you might receive pre-approved credit card offers based on a soft pull of your credit.
Things to Know
Before applying for significant loans or credit, it’s wise to ask the lender about the type of inquiry they’ll perform.
Keeping hard inquiries to a minimum can be beneficial, not just for your credit score but also to avoid overextending yourself financially.
When shopping for a specific loan like a mortgage, you will want to compare rates from different lenders, which typically requires hard inquiries. Luckily, credit rating agencies recognize this behavior and multiple inquiries of the same type within a short period (e.g., several mortgage lenders) might be grouped as a single hard inquiry on your report.
It’s also a good practice to regularly review your credit report to ensure all hard inquiries were authorized by you, helping in early detection of potential credit fraud.
