Liza Ellis | October 21, 2022
Summary: A hard credit check occurs when a lender performs a detailed inquiry into your credit history, and it can make your credit score drop. This generally happens when you apply for a loan or a new line of credit. A soft credit check is a less-detailed inquiry into your history, and it does not hurt your score. Protect your credit score from unfair debt collectors with SoloSuit.
Most people have likely heard the term ‘credit check’. It’s a tool used to assess how financially responsible an individual is, determining their creditworthiness. But do you know the difference between a hard and soft credit check, and in what situations each one is likely to occur?
In this post, we’ll provide you with a breakdown of the key differences between hard and soft credit checks, and detail when you can expect them to happen. Understanding this key information will enable you to make better decisions to help take control of your finances—read on for a better financial future.
Simply put, a hard credit check is a more detailed inquiry into your credit history, and it can lower your credit score. However, it’s important to note that the impact is typically small; hard inquiries stay on your report for two years, but they only have an effect on your score for the first 12 months.
If you’re shopping around for a loan or credit card, it’s best to do so within a short period of time, as multiple inquiries within the same category (i.e. mortgage) will only count as one hard inquiry if they occur in a short span of time. So, if you’re considering taking out a loan, be sure to shop around and compare rates before submitting an application.
A soft credit check is a less detailed inquiry, and it doesn't have any effect on your score. Lenders will often do a soft credit check before approving you for a loan or line of credit, in order to get an idea of your creditworthiness. By understanding the difference between these two types of credit checks, you can make more informed choices about when to apply for loans and other forms of credit.
A hard credit check happens when you apply for a loan, a mortgage, a credit card, or anything else that requires borrowing money. It’s carried out by a financial institution, generally a lender, and they will pull your credit report and use the information to decide whether or not to approve your loan.
Let’s take a look at an example.
Example: Jeremy wants to apply for a new credit card with American Express. In order to qualify, the card company must run a hard credit check and investigate his credit history to determine if he will be a trustworthy borrower. Luckily, Jeremy qualifies, but the hard credit check decreases his credit score by about 20 points. After making his card payments on time for the next several months, however, Jeremy’s score increases by even more than he started with.
A soft credit check is also known as a pre-approval check or an inquiry. Soft checks can happen when you check your own credit score, when a business checks your score to see if you're eligible for pre-approval on a loan or credit card, or when a landlord does a background check before renting an apartment to you.
Let’s consider another example.
Example: Jeremy is thinking about applying for a credit card with Synchrony, and he finds out that he can get pre-approved for the card with a soft credit check that won’t hurt his credit score. Synchrony runs the soft check, and Jeremy gets pre-approved. He decides not to open the new line of credit at the moment, and his credit score remains untouched.
Now that you know the difference between hard and soft credit checks, you can be prepared for when they happen. Remember that a hard inquiry can harm your score, and unfortunately it can’t be removed within the two year period since it’s been carried out, so bear this in mind before applying for any lines of credit.
Having a debt in collections is one of the worst marks you can have on your credit report. It’s not uncommon for creditors and debt collectors to report fraudulent or incorrect information to the credit reporting agencies. When a collector contacts you about a debt you supposedly owe, protect yourself by sending a Debt Validation Letter to formally request that they verify the debt.
If the debt cannot be verified, you’re off the hook. Debt collectors may have already reported the collections account to the credit bureaus, but you can dispute it and have the negative mark removed.
SoloSuit can help you draft a Debt Validation Letter in minutes. All you have to do is respond to a few questions, and you will increase your chances of beating a debt collector almost immediately.
Learn more about how a Debt Validation Letter can help you in this video:
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