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Securing good credit by finding a reliable lender is the most significant step in applying for a loan, but it’s only the first step. After you’ve submitted your application, banks and credit unions are going to solicit records of your credit history by way of either a soft or hard pull. Green Light Auto Credit has drawn up the differences between a soft pull and a hard pull to help borrowers clarify their understanding of this complex and integral part of loan acquisition.
A hard pull is when a bank, credit union, or other financial institution initiates an inquiry into your credit report to see if you are a dependable borrower. An inquiry of this type almost always requires your permission.
The most common type of soft pull is when a prospective employer investigates your credit history as part of a background check. Getting pre-approved for a credit card and checking your own credit score are also considered soft pulls. A soft pull can occur without your permission.
Soft pull credit inquiries do not affect your credit history or subsequent FICO score in any way. Hard pulls, however, are another matter entirely. This is because the very fact that a financial institution is assessing your credit history will subsequently appear in your credit history.
For every hard pull, your FICO is roughly calculated to drop by as much as two points, though these can be earned back within a year’s time. Multiple hard pulls within a month-by-month succession are reflected negatively on your FICO score because they indicate an excessive appeal to borrowing money that is typically solicited for larger expenses with little evidence of continued future payment. You can help prevent this by keeping your larger loan applications as low as possible.
Now that you now know the difference between a hard pull and a soft pull, it’s up to you how and where you apply that knowledge in building a solid foundation from which you can secure good credit. Green Light Auto Credit is happy to work with you, so feel free to contact us at (800) 200-5551. or apply for financing online.
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