Your Guide to Soft Checks Versus Hard Checks

Various entities use credit checks to ensure you have enough history and good credit to pay the lender back on time. While most people refer to these as credit checks, there are actually two different kinds. 

There are soft and hard credit checks. People pull credit checks when you're opening credit cards, signing leases, and more. But what is the difference between a soft and hard check? Here's your guide with everything you need to know about soft and hard credit checks.

Soft Checks

You'll see soft credit checks when looking at your credit report. Typically, they're the check someone will use when someone has minimal information to make you a promotional offer. 

When Soft Checks Are Used

So, when does a lender or someone use a soft credit check on you? Soft credit inquiries usually happen when a company has enough information to give you a credit offer but doesn't have ample information. 

Soft inquiries usually happen when you're getting offered pre-approved credit cards or a specific loan. When a company performs a soft credit check on you, they won't see your entire credit report when they check your information. 

Another reason to use a soft credit pull is when you're trying to move into a new place and your landlord needs to check your credit. Employers who need to check credit for whatever reason often run a soft check versus a hard one.

In other instances, when you want to check your own credit report, that's considered a soft credit check, but you'll still be able to see your entire report since it's your information.

Hard Checks

Hard credit checks are what most people associate with credit checks. More often than not, you're aware when someone is doing a credit check on you, and these are hard checks because people pulling your report need an acceptable reason to do so, which requires you to know it's happening.

When Hard Checks Are Used

You normally think of hard credit pulls when you hear a credit check. People pull your credit score when you're applying for traditional credit cards to see where your line of credit is and how much they deem you can handle based on your credit history. 

Other reasons why people will do a hard credit check on you include when you're applying for car loans and mortgages. A good rule of thumb to remember is that if you're applying for a loan, almost any kind, they will require a hard credit check. 

These credit checks require knowing more about you and your credit background, so they have to have a valid reason to run this information on you, unlike with soft checks. 

Similarities Between Soft and Hard Checks

There are quite a few similarities between soft and hard credit pulls. The main similarity is that it's a way for a lender to get an idea of your credit history and whether you're capable of handling the line of credit you're applying for or what they're going to offer you. 

Other similarities include that the one pulling your credit will be able to see your credit score to help them determine if they will offer you the line of credit. 

Differences Between Soft and Hard Checks

As for the differences between the two credit checks, there's one fundamental difference. Only hard credit checks will have an effect on your credit score. 

While the effect can be minimal, these checks will cause your credit check to go down temporarily, unlike with a soft credit pull. 

Another difference between soft and hard credit checks is that hard credit checks will appear on your credit report. 

So, whenever you or someone else pulls your credit report, they'll see the last time your credit was pulled. Soft checks don't affect your credit score and won't appear on your credit report. Since your credit score won't change with a soft check, it's the preferred method for most lenders and people applying for credit. 

Also, it's far more affordable to run a soft check than a hard credit check, which is why businesses prefer to use a soft check if they can. Lastly, you need a social security number to run a hard check, and you don't need one with a soft credit check.

How Lenders Can Benefit From Streamlining API Checks

Lenders can benefit significantly from streamlining application programming interfaces (API) checks. Streamlining API checks can help make checking credit scores more seamless and allow them to put more focus and energy into other business aspects. 

Soft checks are easier to run because they don't require nearly as much information to run as hard credit checks, so streamlining API checks for soft credit checks is an excellent idea. Automating the process can also limit errors, reduce costs, and lower lenders' workloads to check credit scores.

Threats That Are Cause For Soft Checks

The main threats that businesses will have that cause them to want to do soft credit checks on customers are financial threats. 

They might think that their customers are being fraudulent and want to see how their credit looks and then pull a soft credit check to ensure their safety. Pulling soft credit reports on customers will allow businesses and lenders to make smarter business and financial decisions. 

Conclusion

While most people lump soft and hard credit checks into one term, they're two separate things. Soft checks are easier to run, don't require a social security number, and won't appear on a credit report or affect a credit score. 

On the other hand, hard credit checks are more expensive to run, require a valid social security number, and will show up on your credit report and alter your score. Both are beneficial for different reasons, but most people will run a hard credit check before a soft one. 

At the end of the day, soft checks are great for protecting businesses from financial threats and are an excellent option for most people.

If you or your business could benefit from automated API credit checks, book an appointment with Soft Pull Solutions for a comprehensive discussion today.