Soft pulls won’t harm your credit score, but hard pulls can lower it for up to 12 months and remain on your reports for up to two years. Think of a soft credit pull as a cursory glance at your credit reports, whereas a hard credit inquiry is a deep dive, which only happens when you fully apply for new credit.
A soft credit pull, or soft inquiry, won’t affect your credit score at all. When you check your own credit reports, it’s considered a soft pull. If you’ve ever received a letter from a credit card company saying, “You’re preapproved!” then they’ve done a soft pull on your credit reports. Potential landlords, utility companies and private citizens can all conduct soft pulls for a surface-level look at your credit reports. And many lenders also offer a preapproval process that only requires a soft pull.
A hard credit pull, or hard inquiry, requires your permission, and it can harm your credit score for a few months and remain on your credit reports for up to two years. These happen when you apply for new credit, such as a credit card or loan. With a hard pull, you give a lender permission to request your credit reports to determine your creditworthiness for your new credit account.
The impact of a hard credit pull can depend on your current credit score, but it’s typically around five to 10 points per hard pull. So, while it’s not a huge drop, it can be a pain for low-credit borrowers or those right on the edge of credit score requirements.
Whether you’re approved for the new credit, hard inquiries are reported and can harm your credit score for up to 12 months but fall off completely after two years.
Credit scoring models consider borrowers who frequently apply for new credit to be high-risk. FICO and VantageScore track how often you apply for new credit. If you apply for new credit often, it lowers your credit score.
Hard inquiries go under the FICO category called new credit, which makes up 10% of your FICO credit score. Borrowers who frequently apply for new credit may be at risk of being overextended financially, so each time you apply for new credit, it’s noted on your credit reports for future potential lenders to see.
If you open a new credit account, that will also impact your credit score thanks to the category called length of credit history. It makes up 15% of your FICO credit score and tracks the average age of all your active accounts. By opening a new account, you’ll temporarily decrease the average age of your accounts, which can lower your credit score.
Rate shopping involves applying with multiple lenders within a short time for the sake of comparing rates to reduce the hard pull impact. If you apply for the same type of credit within a small window, the credit bureaus note all the hard inquiries, but the credit scoring models consider the multiple hard pulls as one in calculating your credit score.
The credit scoring models understand that when you apply for the same type of credit multiple times, such as a mortgage, you’re comparing rates. Older versions of FICO allow for a 14-day span for rate shopping, and the newer FICO versions allow for up to 45 days. So, even if a lender is using an older version of FICO, you still have at least two weeks to check rates with multiple lenders with minimal impact on your credit score.
However, rate shopping may not apply to things like credit cards. Each hard inquiry with a new credit card application will likely harm your credit score, because applying for multiple credit cards can be a sign that you’re overextended financially.
These credit-building products don’t require a hard credit inquiry, so applying for them won’t affect your credit score.
Since hard credit inquiries can add up, apply for new credit sparingly. Multiple five to 10 point drops in a short time can mean a drastic drop in your credit score for just applying.
You should also remember that checking your credit reports doesn’t harm your credit score at all. In fact, it’s encouraged to check your credit reports frequently. You can request free weekly copies of your credit reports from AnnualCreditReport.com or from the credit bureaus themselves: Experian, Equifax and TransUnion.
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