What is a Soft Credit Check
What is a Soft Credit Pull?
In regards to credit checks, you have probably heard of soft credit checks and hard credit checks. What are the differences between them?
Soft Credit Inquiries Are Private
When a person or organization obtains a soft credit pull, only they (and anyone they tell) will know it ever happened in the first place (minor exceptions may apply). Contrast with a hard credit pull, where knowledge that the check happened appears on your credit score and can be seen by other people who do a soft or hard credit pull.
Soft Credit Checks Are Informational Only
The reason hard credit pulls adversely affects your credit score is because they are done with the intention to obtain a new form of credit. When you or someone else does a soft inquiry, it does not necessarily mean you are looking to obtain a new line of credit. Doing a hard pull sends information that you are planning to put on more financial obligations, making you a riskier lender.
Whether a credit check is hard or soft can sometimes be at the discretion of the person pulling. Since utility companies technically give you the service (gas, electricity, water) and then bill you after it is consumed, a utility company may elect to do a hard credit inquiry (because of the intention to take on credit in the form of services), or a soft credit inquiry (because they want to maintain rapport with the customer). Generally, the greater the monetary value of the loan, the more likely it is the pull will be a hard pull (a rental application is more likely to involve a hard pull than a utility company’s pull).
If a potential employer asks to perform a credit check on you, it should be a soft credit pull, because an intention to be hired is not the same as an intention to take credit. If you see an unauthorized hard inquiry on your credit score, make sure to dispute it with the credit agencies.
Soft Credit Checks Do Not Impact Credit
Credit is like juggling: the more balls you have in the air, the harder it is to keep all of them in the air. By holding more forms of credit, you are inherently less likely to be able to fulfill all of your financial obligations. A hard credit check shows the intention to add another ball or few to your juggle. The amount of damage a hard credit pull takes depends on a variety of factors (such as length of credit history, current credit score, credit utilization, etc.), but generally will range from one to ten points. While a one to ten point ding is unlikely to affect your chances of getting a loan, it can raise your interest rate. In contrast, a soft credit pull will take off zero points.
Soft Credit Checks Do Not Require Your Consent
While a company (such as TopMark Funding) may be nice enough to ask for your consent before performing a soft pull on your credit, they are not legally obligated to do so. This is why you may often get pre-approval for credit cards you never applied for; credit card companies performed soft pulls on your credit without your knowledge or consent, and are offering you a line of credit based off of it. Hard credit pulls need either your express (signing an agreement that details a hard check) or implied (replying to a credit offer with additional personal details such as income) consent in order to be done legally. If someone does an unauthorized hard pull, they violate the Fair Credit Reporting Act and can be sued for wrongdoing (although the resulting litigation is most likely not worth getting the ten points back and disputing the inquiry with the three primary credit agencies tends to be much more productive).
As a rule of thumb, soft credit checks are much less complicated than hard credit pulls. Your credit could be softly pulled thousands of times a day and, aside from possibly getting a stream of credit card offers in the mail, you would be none the wiser. Hard credit pulls require your consent before they can be performed, and impact your credit score.
Authorize hard pulls carefully, as a lower credit score of even one point can change your interest rate. Additionally, if you see a hard inquiry on your credit report that you did not consent to, report it and dispute it with the credit agencies.
Fortunately for truck business, TopMark Funding never does a hard pull on credit when searching for a loan to finance your next business vehicle. Whether your credit is excellent or not, TopMark Funding can find the best loan with the best interest for you. TopMark funds semi-trucks, commercial vehicles, transport vehicles, and more. Contact us today for a free, no-obligation quote.