Hard vs. Soft Credit Checks and Your Credit Score

As I’ve noted elsewhere, your credit score is an incredibly important number. Even if you don’t need it for securing credit, it can influence your insurance rates, play a role in landing your next job, and help (or hinder) you from getting an apartment. Thus, it’s in your best interest to understand the factors that influence your credit score.

As most people are aware, a large number of credit checks is viewed by creditors as a possible warning sign that you might be in financial trouble. But did you know that there’s more than one kind of credit check? In fact, there are two main types, and they have very different effects on your credit score.

A soft credit check (a.k.a., soft pull or soft inquiry) doesn’t show up on your credit report — though they are tracked in the credit history that you see when you check your own credit. As such, soft inquiries have no effect on your credit score. Soft inquiries occur when you check your own credit, when a potential lender pre-screens you for a solicitation, when an employer checks your credit as a pre-condition of employment, etc.

A hard credit check (a.k.a., hard pull or hard inquiry) occurs when a lender or credit issuer checks your credit as part of an application for a loan or other form of credit. In addition, some banks will do a hard credit pull when you open an account with them, as well non-prepaid cell phone carriers when you sign up for service.

How much of an impact does a hard inquiry have on your credit score?

The prevailing wisdom has been that hard credit checks “cost” you about 5 points off your credit score, though the effect drops off over time. In doing the rounds this morning, I actually ran across some hard data on this — a reader over at pfBlueprint reported that two hard credit checks resulted in an 11 point dip in their credit score.