The difference between soft and hard pulls and how they affect your credit score

What is a credit score check?

A credit score is a mathematical formula that creates a three-digit number from your credit report. Lenders use this number to make credit decisions, such as lending funds for mortgages or buying a car. A credit score can also prove your creditworthiness to inquiring businesses. When businesses inquire about your credit score (referred to as an “inquiry”), you can expect a soft or hard pull to take place. The two terms are often represented vaguely, so that’s why we’ll explain the difference between soft and hard pulls and how they affect your credit score.

What is a credit inquiry, and what is the difference between soft and hard pulls?

A credit inquiry is when a business requests to view your credit report. Credit inquiries can be requested from several different businesses for many reasons. The inquiries are then classified in two different ways: a soft pull or a hard pull.

Both types of pulls appear on your credit report, but only you can see your soft pulls (such as reviewing your credit score on Credit Karma.) Anyone who requests your report can view your hard pulls. It’s important to understand the difference between the two, so here’s what you need to know:

A soft pull is a credit inquiry done by a business checking your credit only to confirm your creditworthiness. Checking your own credit score is also considered a soft pull. Because a soft pull is done when you are not applying for credit at an institution, it doesn’t affect your credit score at all.

A hard pull happens when an institution examines your credit report to decide whether or not to offer credit to you, such as applying for a loan. A hard pull can knock off about 5 points from your credit score.

What is an example of a credit pull?

For example, Rotessa runs credit score checks on all onboarding clients using a verification process with Certn. Because we are a financial business, we want to be sure our clients are creditworthy. With Certn, clients can verify their identity and Certn will report back with the client’s credit score. This is a great example of a soft pull, because Rotessa is simply checking for creditworthiness–not to extend credit.

Conclusion

Now you should know the difference between soft and hard pulls and how they affect your credit score. If you have questions, feel free to leave a comment. If you’re curious about what Rotessa is and how we can help your business collect automated payments, you’re welcome to sign up for a free account today!