Credit is an important factor in your life and it’s critical to monitor your credit score. Good credit allows you to qualify for and receive mortgage loans, car loans, student loans, and better credit cards.
While debt is never desirable, it is something that just about all of us will have throughout our life. I’m sure we all wish we could pay for our home with cash, but it just isn’t realistic.
Checking up on credit can be down in two ways. The two methods are hard and soft inquiries, also known as pulls. Let’s break down soft pull versus hard pull.
Soft Pull
What is it?
A soft pull is a check done on your credit that requires minimal information, usually just a name and address, and provides the needed information.
Who can do it?
You can do a soft pull of your credit to check your score, usually by receiving a free yearly report. Others who can do so include employers, landlords, and anyone offering you a pre-qualified offer on a credit card or insurance quote. These pulls can typically be done without your permission. This list is not all-inclusive, there are others who can do a soft pull.
Does it affect my score?
No, it doesn’t. Soft pulls won’t lower your score or have any negative impact, especially since they can be conducted without your permission.
Hard Pull
What is it?
Hard pulls are usually done by the institution that is considering your loan application. A hard pull gives them access to see your credit and how you have done in paying off your debt so they can make a decision on whether they feel comfortable loaning you money. You need to approve hard pulls usually.
Who can do it?
Lenders and financial institutions can do these checks. Anyone looking to give you a formal loan can request this pull to verify all your information.
Does it affect my score?
Typically, yes. There is technically a small chance nothing will happen, but you should generally expect your score to drop a little when a hard pull is done. Any hard pull will knock a couple points off your score. Depending on which service the information is requested through will determine how the score is affected. FICO is one of the most common, and a hard pull can take 0-5 points of your score.
If you are applying for more than one credit card or loan at a time, research the window given to you to apply and combine hard pulls. FICO gives a grace period in which any pull done within a two week period is considered one pull. A hard pull will leave a notation on your credit report usually for a couple of years, so anyone who does a hard pull can see if you have recently had other hard pulls done.
Conclusion
It is important to maintain a good credit score. Checking your own score will not negatively impact it, and can help you keep up good habits and know where you stand. By being wise about borrowing money, and being timely in paying it back you can build good credit and move forward to the bigger things in life.
