When it comes to managing your credit and financial well-being, understanding the difference between hard and soft credit inquiries is crucial. These terms refer to the types of credit checks conducted by lenders and institutions when assessing your creditworthiness. While both inquiries involve accessing your credit information, they have distinct characteristics and implications. In this article, we will delve into the world of credit inquiries, exploring the differences between hard and soft inquiries, their impact on your credit score, and when and why they occur. By gaining a deeper understanding of these credit check types, you can make informed decisions and proactively manage your credit health.
What is a Hard Credit Inquiry?
A hard credit inquiry, or hard pull, is a request for your credit score. This will appear on your credit report and affect your score. Hard pulls occur when you apply for financing with a financial institution such as a bank, credit card company, or mortgage broker. As the name suggests, hard inquiries can impact your credit score.
A single hard pull can lower your credit score by a few points. This may not drastically affect your credit score, as long as you only have one hard pull every once in a while. However, having multiple hard inquiries in a short period of time can raise a red flag to lenders. To credit bureaus, multiple hard credit inquiries signify you are looking to take on a lot of debt. To avoid this, it is best to space out the time between your credit card applications so the effects of the hard pull will have less of an effect.
Some credit bureaus will offer a grace period before affecting your credit score by a hard pull. FICO can also record inquiries for the same type of loan from different lenders as one single inquiry, as long as they are made within a certain time frame of each other. This allows you to try to determine the best deal possible when looking for financing or other working capital.
What is a Soft Credit Inquiry?
A soft credit inquiry or soft pull is a credit inquiry that does not show up on your credit report and rarely affects your credit score. Soft pulls are generally done to see if you qualify for certain loans or lines of credit, or as part of a background check. These soft pulls also occur when you personally check your credit score on websites such as CreditKarma. Soft inquiries are not done in regards to an application for credit specifically and therefore have no real effect on your credit score.
Here at REIL Capital, we strictly run soft credit inquiries, because we understand how hard you work to maintain your credit score. We know a good credit score can take years to build and we want to make sure they stay good. If you are looking into acquiring financing for your business, we pre-qualify the file before conducting our soft pull – this is to make sure other aspects of your file qualify for financing, before running the risk of affecting your credit score. Fill out our commitment-free and risk-free application. When you apply with us you will have no effect on your credit score. We would just like to get you the best offer we possibly can.
