What Is a Hard Credit Pull and How Does It Affect Credit?

If you’ve ever applied for a loan, a credit card, or even turned on utilities at a new home, you likely are somewhat familiar with a credit check. Lenders, credit companies, and utility companies check your credit to make sure you can pay back loans, pay off your credit cards, or will pay your utility bills. 

However, do you know about the different types of credit checks? There are two different types: a hard credit pull and a soft credit pull (sometimes called hard or soft inquiries).

So what is a hard credit pull? And a soft pull? Read on to learn more. 

What Is a Hard Credit Pull? 

A hard credit pull typically occurs when you are requesting a new line of credit, such as a credit card, or are applying for a loan (personal loan, mortgage, car loan, etc.). The lender or company that is checking your credit needs to see your history of paying off your debts, how much debt you have, and how much available credit you have. 

They need this information to decide if they want to lend to you. Your credit history will tell them whether you are likely to pay back your debts; if you have poor credit, they may not lend to you, approve you for a credit card, or will give you a much higher interest rate. 

You must agree to a hard credit pull. When you apply for a credit card or for a loan, part of your application is to indicate that you agree to this credit pull. The impact on your credit score is relatively small for one hard credit pull, but if you are applying for a lot of credit cards at the same time, your credit could be negatively impacted. 

A hard credit pull will stay on your credit report for two years but it will likely only impact your credit score for a few months.

What Is a Soft Credit Pull? 

A soft credit pull occurs when you check your own credit or a company checks your credit as part of a background check for employment. If you’ve ever received a mailed or emailed credit offer saying that you are qualified for a certain credit card, balance transfer, or another incentive, the credit card company has likely conducted a soft credit pull.

A company like Bento may do a soft credit pull to offer you rewards for good credit.

Companies do not need your permission to do a soft pull and as a result, soft pulls do not impact your credit history. You can check your credit as much as you want and it won’t have a negative impact on your credit score. 

Soft credit pulls may be recorded on your credit report, but they’ll only be visible to you. Because you’re not applying for new credit with a soft pull, you are the only one who can see them. 

Understand Credit Inquiries Before You Agree to Anything

Before you apply for any type of loan or credit, be sure you fully understand what you are applying for and consider whether you are ok with that hard pull on your credit report. 

Now that you can answer “what is a hard credit pull” you can make an informed decision when applying for credit. 

If you found this guide helpful, be sure to check out our other financial articles before you go.