A hard credit pull VS. a soft credit pull. If you opened this article not knowing the difference, trust me, you’re not alone. When I was a banker, most of the clients that I worked with had no idea. But let me tell you, there is a BIG difference between hard credit pulls and soft credit pulls. And even more importantly, you NEED to know the difference to avoid taking hits on your credit every time you turn around.
So let me explain what hard credit pulls and soft credit pulls are so you can stop beating up on your credit score and maximizing it!
(1) Soft Credit Pulls
Soft credit pulls are good credit pulls. A soft credit pull is one that is done by an app like Credit Karma or the Experian app. And sometimes credit card companies or even banks can do soft pulls in their various apps or online banking platforms.
What is a soft credit pull?
A soft credit pull is one in which an app looks at your credit report and sees:
- All of your credit accounts.
- How much debt you have.
- Your payment history.
- Hard credit pull history.
- Your credit card utilization.
- Any old debt that you may have.
- Your credit history length.
When the app or program sees everything that is on your credit report, it gives you an ESTIMATED credit score. The word ESTIMATED is very important.
The three credit bureaus (TransUnion, Equifax, and Experian) do not release the algorithm to calculate credit scores to ANYONE. It is a trade secret. So any party that does a soft credit pull is simply estimating your credit score. The score given is not likely close but not correct.
I cannot stress this enough. I had people get SOOOOO mad at me because when I would do an official hard credit pull it would be different from their Credit Karma number.
Here’s the most important thing with soft credit pulls. They do NOT affect your credit score at all. That is really great news! You can see what is on your credit report (so you can fix any issues) and it won’t hurt you.
In my experience as a banker, I gathered data to show that generally a soft pull credit score was about 20 points higher than the person’s actual score.
So if your soft pull credit app says that you have a 680 credit score, it is probably closer to a 660. Not always though. I sometimes saw people’s actual scores be even higher than the soft pull said (but not very often).
The bottom line with soft credit pulls is that you can do as many of these as you want without it hurting your actual credit score. In fact, I would encourage people to do so. That way you can be sure of what is on your credit report. Just remember that when you get your score, your real score is probably about 20 points lower than whatever the soft score says.
But make sure you do a SOFT PULL because…
(2) Hard Credit Pulls
Hard credit pulls are also called “official credit pulls”. These credit pulls are going to be done mostly by potential lenders. When you go to a car lot and have the salesman pull your credit it will be a hard credit pull. The same is true if you apply for a mortgage, get a credit card, or any other debt product unless it explicitly states that there is no credit check required.
Hard credit pulls will drop your credit score. Doesn’t that suck? In order to pull your credit report (officially) you have to hurt your credit score. I don’t get it but alas, this is the world that we all live in.
A hard credit pull will usually decrease your credit score 10-15 points for about 60 days (in my experience as a banker). This is not written in stone, but this is the average that I have seen.
Here is the thing that you should do if you are looking for a new credit card, car, mortgage, etc. You should have several potential lenders pull your credit in a short amount of time. When you do this, it actually looks like one hard credit pull instead of several hard credit pulls on your credit report.
So if you are mortgage shopping, go to three or four different banks or mortgage lenders during a week or two and have them all pull your credit. The same would be true for credit card shopping or car shopping.
#CreditHack
Limit your hard credit pulls to no more than two per year. So if you are looking for a new credit card in May and looking for a car loan in November that’s cool. Just don’t look for a credit card in May, a car loan in June, another credit card in September, etc.
Keep your hard credit pulls limited.
Lastly, a hard credit pull will stay on your credit report for two years generally. It’s not a huge deal, just important to know.
Final Thoughts
Sometimes it is necessary to have your credit pulled. Sometimes you may need to take out a loan. It happens. Just make sure that you are protecting who sees your credit report. Use one of the free apps or a banking program that you may have to help you pay off old debt, decrease your credit card utilization rate, and generally keep a pulse on your credit report.
That’s what I do.
And when you need to have a hard credit pull, just do your shopping around of lenders quickly so that it comes off as one pull instead of several. This is also what I have done.
With these tips, and my other credit articles, you can really maximize your credit score and be the most desirable candidate for a loan if you need to take one out. That means that you will get the best terms and lowest interest rate!
Until next time!
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