Are you considering a loan and wondering about the differences between a soft and hard credit inquiry? Well, that’s understandable. If you’re new to this, it’s all a bit confusing. While these terms are puzzling, understanding the contrasts between them is imperative.
Soft inquiries are gentle on your credit, and hard inquiries are not. But what does that mean for you? Well, in the content below, we’ll break down the differences between a soft credit check and a hard credit check.
By the end of this article, you’ll understand everything there is to know about credit inquiries. With that said, let’s get started!
What Is a Soft Credit Inquiry?
A soft credit inquiry is a credit check that does not affect your credit score. It’s often used by lenders to probe your creditworthiness before sending you an approved offer. Soft inquiries can also be initiated by you, such as when you check your own credit.
Furthermore, a soft credit check does not appear on your credit report. Therefore, it won’t be visible to any lender who looks at your report.
Soft inquiries are also referred to as “soft pulls” or “soft credit checks”. They’re harmless and will not impact your ability to borrow money in the future.
Examples of Soft Credit Inquiries
When it comes to soft credit checks, you can rest easy knowing that your score won’t be impacted. Here are some examples:
- Checking your credit report
- Pre-approved credit offers
- Employment background checks
- Insurance quotes
Although this type of credit check is harmless, you still have to be aware of the lending process when applying for certain short-term loans and fast loans. It’s important to note that if you decide to follow through with an offer and apply for credit, a hard credit inquiry will likely be initiated.
For example, if you request to borrow funds, the lender may ask that you go through the pre-approval process. Putting in your information to see if you qualify won’t affect your credit. However, if you are pre-approved, the creditor will then do a hard inquiry before they actually lend you the money.
The Impact of Soft Credit Inquiries on Your Credit Score
As previously mentioned, soft credit inquiries have no impact on your credit score. They are not factored into credit scoring algorithms and are not visible to lenders or creditors. However, it’s still vital to monitor your credit report for accuracy and to make sure that all inquiries are valid.
What Is a Hard Credit Inquiry?
A hard credit inquiry is a check that can lower your credit score by a few points. It occurs when a lender pulls your credit report as part of a credit application. Hard checks are used to determine the risk of extending credit to you.
Unlike soft inquiries, they’re visible on your credit report for a few years. Multiple hard inquiries in a short timeframe can signal to lenders that you are a high-risk borrower and can reduce your credit score even further.
Examples of Hard Credit Inquiries
Unfortunately, it’s impossible to completely avoid hard credit checks. Below are a few examples of scenarios that call for a hard inquiry:
- Applying for a mortgage
- Applying for a car loan
- Applying for a credit card
- Applying for a bank loan
These types of inquiries should only be initiated with your permission and can heavily impact your credit score. So, it’s essential to limit the number of hard checks on your credit report and only apply for credit when necessary.
The Impact of Hard Credit Inquiries on Your Credit Score
A hard credit inquiry can lower your credit score by a few points. The effect on your credit score depends on various factors like the number of inquiries, the type of credit you’re applying for, and your overall credit history.
If a hard check is mandatory for the credit that you need, try to apply when your credit is in good standing. For instance, you don’t want to apply for credit cards or car loans when your credit already in bad condition.
Pull your report first and see what’s on it. It’ll give you a good idea of whether your chances of approval are high or not.
Why Hard Credit Inquiries Are Necessary
Hard credit inquiries are necessary because lenders must determine your creditworthiness. Remember, when a creditor allows you to borrow money, they’re expecting to receive it back. The way that you’ve handled your debt in the past is a telltale sign of how you could potentially handle things in the future.
So, if you have major delinquencies, you may not get approved. Furthermore, be aware that having a good credit score doesn’t mean that a creditor will lend you money. Again, during a hard inquiry, they look at everything. So, if your score is high, but your report shows that you’re in debt, approval isn’t guaranteed.
The good news is, you can check your report for accuracy and dispute any inaccurate information. This can help improve your credit score and reduce the impact of hard inquiries. Doing so will make it much easier to get online loans and any other credit that you need.
Fast Loans Canada: Get the Money You Need
We hope this article thoroughly explained what a hard credit inquiry is and how to prepare for it. However, if you need cash fast, you’re in luck. At EasternLoans, we offer no-credit-check loans.
We base your ability to borrow on your financial stability. So, if you’re a Canadian citizen who earns more than $1,200 monthly, approval is possible.
Do you have any questions for us? If so, call 1-855-223-9313, or apply for a loan on our website. Good luck!