Soft Credit Check: Meaning and How It Works

Soft Credit Check

When it comes to borrowing money from a financial institution, understanding the credit process can be confusing. From filling out applications to checking your credit score, it’s important to understand the process and how it can affect you in the long run. One type of credit check that is often misunderstood is a soft credit check. In this blog post, we will explain what a soft credit check is, how it works, what it shows, and more.

What is a Soft Credit Check?

A soft credit check is a type of credit check that does not affect your credit score. It is sometimes referred to as a soft pull or soft inquiry. It is different from a hard credit check, which does have an impact on your credit score. Soft credit checks are used by lenders and creditors to determine your creditworthiness without affecting your credit score.

Soft credit checks are used for a variety of reasons, such as checking your credit for pre-qualifying for a loan or to see if you meet their lending requirements. They are also used to check your credit history for employment or rental applications. Most lenders and creditors use soft credit checks to determine whether or not you are likely to pay back a loan or meet the requirements for a job or rental application.

How Does a Soft Credit Check Work?

A soft credit check is done through one of the three major credit bureaus, Experian, Equifax, and TransUnion. These credit bureaus collect, store, and provide information about your credit history. When a lender or creditor requests a soft credit check, the credit bureau will provide a copy of your credit report and score, without affecting your credit score in any way.

The lender or creditor will then use this information to determine your creditworthiness. They may look at your payment history, credit utilization, open accounts, and more to make their decision. It’s important to remember that it does not affect your credit score in any way, so it’s a good idea to check your credit score regularly.

What Does a Soft Credit Check Show?

When a lender or creditor requests a soft credit check, they will receive a copy of your credit report and score. This report will include information such as your payment history, credit utilization, open accounts, and more. This information is used to determine your creditworthiness and whether or not you meet the lender’s requirements.

It’s important to note that a soft credit check does not show your entire credit history. It only shows the information that the credit bureau has on file. This means that if you have recently opened a new account or made a payment, the soft inquiry will not show it.

Benefits of a Soft Credit Check

Soft inquiries might help you understand how your credit score is reported to major credit agencies. One of the easiest methods to do this is to use the free credit reports and scores provided by your credit card company. Almost every credit card business provides a free credit score evaluation to customers, and each assessment differs depending on the reporting agency employed. These queries are referred to as soft pulls, and they might give you information on your credit score and credit profile every month.

The Fair Credit Reporting Act (FCRA) governs how credit bureaus and other entities gather and distribute financial information about you. You have the legal right to a free copy of your credit report from the credit bureaus every 12 months.
You can also obtain a copy of your report by visiting the government-approved website AnnualCreditReport.com.

Soft inquiries, which appear on your credit record, can provide vital information about which businesses are considering providing you credit. These queries will be categorized as “soft inquiries” or “inquiries that do not affect your credit rating.” This section of your credit report will include information on all soft inquiries, such as the requester’s name and the date of the query.

Does a Soft Credit Check Affect Your Credit?

No, a soft credit check does not affect your credit score in any way. It is simply a way for lenders and creditors to check your credit history without impacting your score.

Does a Soft Credit Check Hurt Your Score?

No, a soft credit check does not hurt your credit score. It is simply a way for lenders and creditors to check your credit history without impacting your score.

Can I Do a Soft Credit Check on Myself?

Yes, you can do a soft credit check on yourself. This is a great way to keep track of your credit and make sure that everything is accurate. You can do this by requesting a copy of your credit report from one of the three major credit bureaus. This will give you a copy of your credit report and score without affecting your credit score.

What Banks Do a Soft Credit Check?

Most banks and financial institutions offer soft credit checks as part of their loan application process. Some may also offer the option to do a soft credit check on yourself. You can check with your bank to see if they offer this service.

How Long Does a Soft Credit Check Last?

A soft credit check is only valid for a short period of time. The length of time varies from lender to lender, but most are valid for 30 to 90 days. After this period of time, the lender or creditor will need to request a new soft credit check.

Can Anyone See a Soft Credit Check?

No, only the lender or creditor who requested the soft credit check can see the information. It is not visible to anyone else.

Does a Soft Credit Check Require SSN?

Yes, most lenders and creditors require a Social Security number in order to do a soft credit check. They use this information to ensure that you are who you say you are.

How Many Points is a Soft Credit Check?

A soft credit check does not affect your credit score in any way, so it is not associated with any points.

How Much Does a Soft Credit Check Cost?

Most lenders and creditors do not charge a fee for soft credit checks. However, you may be charged a fee if you request a copy of your credit report from one of the credit bureaus.

Hard vs. Soft Credit Check

Some credit checks are referred to as “hard,” while others are referred to as “soft.” The distinction between the two names is related to how each type of inquiry may affect your credit ratings.

Hard Credit Check

When you apply for something, a hard credit check or inquiry is normally performed. When a hard inquiry appears on your credit report, it has the potential to reduce your credit score.

Hard inquiries include the following sorts of credit checks.

  • Loan applications (mortgage, auto, student, personal, etc.)
  • Applications for credit cards
  • Credit limit increase requests
  • Lines of credit applications
  • New utility programs
  • Rental applications for apartments
  • Skip tracing by collection agencies

Soft Credit Check

Soft credit inquiries do not affect your credit score. It will not appear on your credit report if a lender checks it. Soft inquiries are only accessible on consumer disclosures, which are personal credit reports that you obtain.

Soft inquiries include the following sorts of credit checks.

  • Checks on personal credit
  • Credit offers that have been pre-approved
  • Applications for insurance
  • Current creditors conduct account reviews
  • Applications for employment
  • Credit Scores and Hard Credit Checks

Why Do Hard Inquiries Matter?

When a lender pulls your credit record, your credit score has the potential to fall. The reason for this is simple math. According to statistics, people who seek new credit are riskier than those who do not.

Consumers with five or more credit inquiries in the previous 12 months are six times more likely to become 90+ days past due on a credit obligation than consumers with zero inquiries, according to FICO. People who have six or more credit inquiries may be eight times more likely to declare bankruptcy than those who have zero queries.

Credit scores are used by lenders and other businesses to help anticipate the risk of doing business with you. FICO and VantageScore credit ratings both forecast the chance of a consumer defaulting (being 90 or more days late) on any credit commitment within the next 24 months.

If something on your credit record indicates that you are more likely to default on a credit obligation, your credit score may suffer. This is true for hard credit inquiries as well as any other behaviors that raise your credit risks, such as excessive credit card use, late payments, and other negative credit information.

How Much Will a Hard Inquiry Cost You?

According to FICO, a new inquiry will typically drop a credit score by no more than five points. As the query ages, its impact on your score should diminish until it no longer counts at all. Of course, when you break it down, the actual credit rating process is a little more difficult.

Hard credit queries do not contribute nearly as much to your credit score calculation as other criteria. Credit inquiries, for example, influence 10% of your credit score in FICO scoring models. Your payment history, on the other hand, is worth 35% of your FICO Score. Under VantageScore credit scoring methods, hard queries are even less important. VantageScore bases only 5% of your score on hard inquiries.

Individual credit inquiries do not have a standardized point value. You can’t, for example, declare that a new hard inquiry will drop your credit score by five points. That is not how credit is calculated.

Instead, a credit scoring model takes into account the overall number of inquiries on your credit report as well as the age of those questions. The remainder of your credit information is also important. People with limited credit history may be more affected by a fresh hard inquiry than those with older, more established credit reports.

How Long Do Credit Inquiries Last?

The majority of credit reporting is optional. Credit card companies, for example, are not legally compelled to disclose client information with credit bureaus. Credit bureaus are also not required to include credit card accounts on credit reports. Account information is reported and included in credit reports because it benefits the companies involved.

Inquiries are not all the same. Law requires credit bureaus to report when they allow anyone access to your credit information. Most queries must remain on your credit report for at least 12 months, according to the Fair Credit Reporting Act (FCRA). Employment inquiries must remain on your credit record for a period of 24 months.

Credit reporting organizations often preserve inquiries on your credit reports for two years. FICO, on the other hand, only considers hard inquiries that occurred during the last year. A hard inquiry that is more than a year old has no effect on your FICO Score.

VantageScore is once again more lenient when it comes to questions. If a hard inquiry decreases your VantageScore credit score, it should recover within three to four months (provided no new negative information appears on your credit report).

Conclusion

A soft credit check is a great way to keep track of your credit without affecting your credit score. It is used by lenders and creditors to check your credit history for pre-qualifying for a loan or for employment or rental applications. It is important to remember that a soft credit check does not show your entire credit history, and it is only valid for a short period of time. Also, note that only the lender or creditor who requested the soft credit check can see the information.

If you’re considering applying for a loan or credit card, it’s important to understand the different types of credit checks and how they can affect your credit score. Knowing the difference between a soft and hard credit check can help you make an informed decision about your financial future.

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