How Accurate is a Soft Pull Credit Check?

How Accurate is a Soft Pull Credit Check?

You might be a lender or mortgage broker who is looking into ways to grow your business by using soft pull credit checks. Or maybe you are someone who just wants to know more about this type of report and what it shows.

At Soft Pull Solutions, we have an online portal that allows you to pull a soft credit check when working with current and potential customers. Through this pull, you are able to see your customer’s credit information and FICO score to prequalify them.

But, you might be wondering how accurate a soft pull credit check can be. Well, let’s take a closer look at what it is, what it shows, and the accuracy it offers.

What is a Soft Pull Credit Check?

A soft pull credit check, or soft credit inquiry, is a way for lenders and other third parties to check a consumer’s credit in a non-invasive way. Where a hard pull credit check shows as an official review on their credit report and can negatively impact their credit score, a soft pull does not.

The company requesting the soft pull also does not need their customer’s personally identifiable information (PII) like their social security number or date of birth. They just use basic information such as their name and address to do the soft pull credit check.

When the soft pull comes back, lenders have a better understanding of a customer’s creditworthiness. This allows them to determine how well the consumer is managing their credit and their potential risk. From there, lenders can pre-approve them for a mortgage or line of credit.

Lenders do not use this type of credit inquiry to approve the actual loan and credit request. When the time comes for approval, a hard credit inquiry will take place. A soft credit inquiry is just used for pre-approval.

A soft pull credit inquiry is a great way for companies to assist consumers without impacting their credit score or making them fill out lengthy applications that ask for PII.

Here are users who might pull a soft inquiry:

What Does a Soft Pull Credit Check Show?

Since a hard credit inquiry is invasive and shows up on a consumer’s credit report while a soft credit inquiry does not, you would think that they show different information. But to the contrary, they do not.

A soft pull credit check shows the same information that you can find on a hard pull. It will show a customer’s lines of credit and loans. It will outline their payment history. It will also show any accounts that have been sent to a collection agency or if they have a tax lien. It will list any other public records attached to their name. It shows it all including their credit score.

How Accurate is a Soft Pull Credit Check?

To put it simply, a soft pull credit check is as accurate as a hard pull credit check. They are both very accurate. Let’s take a closer look as to why.

Credit Bureaus

When a soft credit check is pulled, the credit report comes from the credit bureaus. A credit bureau is a private company that “collects and sells data regarding the credit history of individuals.”

Each of the credit bureaus captures the same type of data for consumers. This includes personal information such as a consumer’s name, address, date of birth, and Social Security number. Bureaus also collect a consumer’s financial information such as bankruptcies, credit application activity, credit card balances, loan balances, payments, student loan information, mortgage information, and tax liens.

While there are multiple credit bureaus that capture a consumer’s financial information, the three most well-known bureaus are Equifax, Experian, and TransUnion.

Where Do Credit Bureaus Get their Information?

Credit bureaus obtain their information from banks, credit card companies, landlords, lenders, and retailers. The bureaus do not have direct access to consumers’ accounts. Instead, these creditors and lenders choose to report account information to the credit bureaus.

Information shared with the credit bureaus may include account closures, balances due, charge-offs, credit limits, late payments, loan terms, on-time payments, and purchases. As this data is collected by the credit bureaus, it is added to a consumer’s credit report.

It is important to note that lenders are not required to share this information. When they do, they are not obligated to share it with all of the credit bureaus. Based on many factors, they may share it with one, two, or all three of the major bureaus. This means that the information on a consumer’s credit report may vary when pulled from all three credit bureaus.

Also, creditors and lenders have varied timing when it comes to reporting financial information to the credit bureaus. Some may report it monthly while others report it quarterly.

Credit Scores

Another part of the credit report is the credit score. A credit score is a three-digit number, usually between 300 and 850, that represents a consumer’s potential risk to lenders. The higher the number, the lower the risk.

There are different credit scoring models out there. However, the two most well-known models are FICO® and VantageScore®.

Each company uses a unique proprietary calculation to determine a consumer’s credit score. These models are updated regularly based on consumer behavior changes, new industry practices, and new technology.

Based on the credit bureau used when the soft pull credit check is run, the credit score can vary slightly between each bureau. This is because the credit score is dependent on the information available from the credit bureau and how they calculate the score.

Regulations

Credit bureaus are highly regulated by the Fair Credit Reporting Act (FCRA). This is a federal law “that regulates the collection of consumers’ credit information and access to their credit reports.” This act is overseen by two federal agencies: the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

Through the FCRA, credit bureaus have rules that they need to follow as it relates to “how consumer’s credit information is obtained, how long it is kept, and how it is shared with others.” The FCRA also regulates who can request a consumer’s information and for what purpose.

In addition to creating boundaries for the credit bureaus, the FCRA works to protect consumers' rights. Consumers are able to request a copy of their own credit reports to verify the accuracy of the information. They can get a free copy annually from each of the three major credit bureaus. They also have the right to dispute information if they find it to be inaccurate.

Although credit reports and credit scores can vary slightly from one credit bureau to the next based on the factors previously mentioned, the information found on a soft pull credit check can be considered accurate.

If you are considering using soft pull reports to enhance your business, Soft Pull Solutions can help. Our online portal allows businesses to instantly see a consumer’s credit information and FICO score as a soft credit inquiry. Our pull gives you access to the three major credit bureaus – Equifax, Experian, and TransUnion. This allows you to see credit scores from all three agencies for comparison.

If you’re interested in learning more about our services, schedule an appointment or contact us today at 844.515.1550.

About the author

Soft Pull Solutions

Back to top