The world of credit scores can be confusing. You may be wondering what the difference between a hard credit check and soft credit check is, and how they affect your credit score. Don’t worry, we’re here to help!
Credit Checks
When you apply for a loan, lenders check your credit history to see if you’re a trustworthy borrower. This can be done through a hard credit inquiry, which appears on your credit report and may slightly impact your credit score.
Hard Credit Check:
When you apply for a loan, lenders check your credit history to see if you’re a trustworthy borrower. This can be done through a hard credit inquiry, which appears on your credit report and may slightly impact your credit score.
Examples of Hard Credit Checks:
- Auto loan applications
- Mortgages loan applications
- Credit card applications
- Student loan applications
Soft Credit Check:
On the other hand, soft credit inquiries are made for informational purposes and do not affect your credit score or show up on your report.
Examples of Soft Credit Checks:
- Background checks by employers
- Insurance applications
- Getting pre-approved for loans or credit cards
How Hard Credit Checks Affect Your Credit Score
As we mentioned above, hard credit checks can sometimes affect your credit score. Applying for many types of loans within a short timeframe can negatively impact your credit score because credit bureaus may think you’re financially strained and at a higher risk of not completing your loan payments. Luckily, the chances of this can be reduced by getting pre-approved for a loan and by not applying for too many different loans close together. Otherwise, having one to two hard credit inquiries per year will have a minor impact on your credit score and only affect it by a few points (around five or less)!
How Long Do Hard Credit Checks Stay on Your Credit Score?
A hard inquiry can impact your credit score for up to 12 months but stays on your credit report for up to three years. If you want a healthy credit report for the future, it’s best to apply for credit only when necessary to avoid negative impacts!
How Soft Credit Checks Affect Your Credit Score
Good news, soft credit inquiries have no impact on your credit score and don’t show up on your credit report! You’re never penalized for soft credit checks, making them worry-free compared to hard credit checks. You can get pre-approved for an auto loan quickly and easily with Birchwood here!
Your credit score doesn’t have to be scary! As long as you’re aware of the different types of credit checks and how to manage them wisely, you’re on track to maintaining a good credit score. Remember that Birchwood is here to help you every step of the way when getting approved for an auto loan!
