There’s no way around it — finalizing any personal loan application will cause your credit score to drop. But many lenders offer preapproval that allows you to see what rates and terms you might qualify for without affecting your credit. The key to finding out if a form will affect it is asking whether it requires a hard or soft credit pull.
Does applying for a personal loan hurt my credit score?
However, some personal loan providers offer preapproval that comes with a soft credit check, which won’t affect your score. This can help you compare offers from multiple lenders before following through with a full application.
It’s unlikely. Personal loan providers will almost always do a hard pull of your credit when you finalize your loan application. While there are some short-term lenders that offer loans with no credit check, these are expensive and should be saved as a last resort.
What is a soft credit check?
Soft credit checks don’t count as inquiries on your credit report — which means they won’t lower your credit score. Lenders and companies frequently do soft credit pulls for background checks or to get an idea of your credit. Unlike hard credit checks, a person or company doesn’t need your permission to run a soft inquiry.
If you’re comparing personal loans, car loans or credit cards, make sure your lender has a preapproval process that only requires a soft credit check. This allows you to preview your potential rates without lowering your credit score — effectively preserving your score until you’ve found a product you’re ready to commit to.
Examples of a soft credit check
Loan and credit card offers in the mail
Loan and credit card preapproval
Background checks
Employment verification
What is a hard credit check?
Hard credit checks are the actual inquiries listed on your credit report. The most common reason for a hard inquiry is when you apply for a loan and accept the offer. The lender will do a hard pull of your credit in order to see your borrowing and repayment history so it can make a more informed decision about your rates and terms.
It may lower your score slightly, but hard inquiries only stay on your credit report for two years. And certain types of loans — car loans, student loans and mortgages — only count as one hard inquiry if applications are submitted within a short timeframe. Just be careful, too many hard inquiries over a few months can take a toll on your score and make you look like a high-risk borrower to lenders.
Examples of a hard credit check
Loan and credit card applications
Rental or lease applications
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How do I dispute a hard credit inquiry?
To dispute a hard credit inquiry you didn’t authorize, contact the credit bureau in writing. The Federal Trade Commission (FTC) recommends including copies of any documents that support your position. You can use the FTC’s sample dispute letter to help guide you.
The credit bureau is required by the Fair Credit Reporting Act to accept disputes and investigate, usually within 30 days. If your dispute is accepted, all three major credit bureaus must correct any incomplete or inaccurate information.
Bottom line
You can’t get a personal loan — or any loan — without a hard inquiry, but it should only lower your score a few points. And if you compare personal loans before applying, you can further limit the impact a hard credit check has on your credit.
Lenders can do soft pulls of your credit without your permission, which is why you may receive prequalified offers in the mail. But a lender can’t do a hard pull of your credit without your permission. If you find a hard inquiry on your credit report that you didn’t authorize, follow the steps above to dispute it.
You can request a free copy of your credit report by phone, mail or online once a year by each of the major credit bureaus: Experian, Equifax and TransUnion.
Yes, but you’ll need to do some work to find a lender or get creative about how you borrow. You can use our guide to getting a loan without a credit score to get started.
Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University.
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