The straight story about ‘hard’ credit checks
Not all credit checks are created equal.
In fact, not all of them have the same impact on your credit score, and knowing the difference could help preserve your credit. A hard credit check—sometimes called a hard inquiry or a hard pull—is different from so-called soft inquiries. One is performed by prospective lenders, the other isn’t. One usually has a direct if temporary impact on your score, the other doesn’t.
The difference is yet another wrinkle to consider in the already opaque system used to calculate credit scores.
Hard credit check vs. soft credit check
A soft check, on the other hand, could come from checking your own credit score, an employer running a background check on you, or a store looking to prequalify you for a promotional rate. These types of checks do not affect your score.
But every time a lender looks at your credit report, that’s recorded by the credit bureaus and can impact your FICO score. Whether it has an impact, and the extent of that impact, depends on several factors.
Good credit history minimizes the impact of hard checks
The bureaus pay attention to how often you’ve applied for credit. Too many attempts at new financing might be an indication you’re a risky borrower; you might be short on cash or simply taking on too much debt. The effect on your score depends on a couple of factors:
- Borrowing history: If you have a solid track record of long-established credit, a hard check or two will probably have a minimal impact, if any. A shorter borrowing history with just a few lines of credit could be bad news, however: Each hard pull could knock as many as five points off a score, leading to higher interest rates and more expensive loans.
- Timing of the checks: If you shop around for the best interest rate, each lender you contact is likely to perform a hard pull. That many pulls in a short window of time can hurt your score. FICO says it controls for this by considering inquiries from multiple lenders for big-ticket purchases such as mortgages and car loans as a single “shopping period,” provided they are all made within a 30-day window.
Timeliness and vigilance are key
Your credit report compiles all credit checks—hard and soft—for two years, but hard credit checks only impact your FICO scores for one year. The key to preventing hard credit checks from hurting your FICO score is to make sure your loan applications all fall within that month-long window. It’s also important to be vigilant about who’s looking into your borrowing history.
As noted, there’s no penalty for checking your own credit score, and it’s possible to see a list of both hard and soft inquiries when you do. So, if there are hard credit checks that don’t look familiar, it’s important to check with the party that initiated them to make sure you’re not the victim of identity theft.
Soft inquiries on the other hand, are much more common, and you’re likely to not recognize them. Pretty much every credit card offer you’ve ever received in the mail came after the issuer ran a credit check on you.