What Is a Soft Credit Check? Definition and How It Works

What Is a Soft Credit Check?

A soft credit check is an inquiry into your credit report initiated either by you or a company. It can occur even if you didn’t apply for credit and is primarily used to screen for preapproval financing offer or background check. The good news is that a soft inquiry does not affect your all-important credit score, which is a numerical representation of your creditworthiness intended to help creditors determine the likelihood of being paid back if they extend credit to you.

Key Takeaways

  • A soft credit check is an inquiry into your credit report either by a company or you.
  • A soft inquiry can occur even if you didn’t apply for credit.
  • It is primarily used to screen for a preapproval offer or background check.
  • It does not affect your credit score.

Credit Scores: Hard Vs Soft Inquiries

How a Soft Credit Check Works

Financial institutions and creditors may want to know whether you are managing your debt and credit history effectively. Creditors might also want to know information such as the number of late payments or your credit usage, such as how much you have borrowed on each loan or credit card. A soft inquiry—also called a “soft pull”—allows a creditor to review your credit report and credit score to get a sense of how well you are managing your credit.

A soft credit inquiry can occur even when you check your own credit report. Below are some of the most common examples of soft inquiries:

  • You give a potential employer permission to check your credit.
  • Financial institutions that you already do business with check your credit.
  • Credit card companies that want to send you preapproval offers check your credit.
  • You apply for a preapproval for a loan or mortgage.

Although soft inquiries don’t impact your credit score, they are listed on your credit report.

Soft Inquiry vs. Hard Inquiry

There is another inquiry that can occur during a credit check that you should be aware of, and it’s called a “hard inquiry” or “hard pull.” This happens when you apply for credit by filling out a credit card application. Hard inquiries also occur when you apply for a mortgage, an auto loan, or any number of other activities that result in a credit decision for or against you.

Hard pulls can harm your credit score for a few months and may stay on your credit report for about two years. The reason why credit bureaus factor hard inquiries into your credit score is that they assume that if you are applying for additional credit, you might be at greater risk of not paying back your existing debts. However, soft inquiries don’t impact your credit score because they are not a formal credit application, so credit bureaus don’t include them in their credit score calculations.

Soft inquiries are inquiries that you either didn’t request or were made solely for informational purposes, while hard inquiries are the result of the credit application process.

Special Considerations

If you’re concerned about the impact of hard inquiries on your credit score, don’t apply for any loans or credit you don’t need. Also, if you want to open a new bank account or start a new cellphone contract, ask if it will result in a hard credit pull before you apply. Being cautious about the type of credit inquiry being executed will help to maintain better control over your credit score.

If you ever see a hard pull on your credit report that you don’t recognize, contact the financial institution that initiated it, because it could be a sign that someone else has fraudulently applied for credit using your name. It could also be a simple error that you may be able to clear up with the credit reporting bureau. For additional help spotting mistakes on your credit report, consider utilizing one of the best credit monitoring services.

Benefits of a Soft Credit Check

You can use soft inquiries to better understand how your credit score is reported with the various credit bureaus. One of the best ways to do this is by taking advantage of free credit reports and scores offered through your credit card company. Nearly every credit card company offers cardholders a free credit score assessment, and each assessment will differ by the reporting agency used. These inquiries are considered soft pulls and can provide you with information on your credit score and credit profile each month.

The Fair Credit Reporting Act (FCRA) regulates how credit bureaus or agencies collect and share your financial information. By law, you have the right to obtain a free copy of your credit report every 12 months from the credit bureaus. You can also get a copy of your report from the government-authorized website AnnualCreditReport.com. 

As soft inquiries are listed on your credit report, they can provide useful information as to what companies are considering extending you credit. These inquiries will be found under a subheading such as “soft inquiries” or “inquiries that do not affect your credit rating.” This portion of your credit report will show the details of all soft inquiries, including the requester’s name and the inquiry date.

Article Sources
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