A soft credit check refers to an inquiry that does not appear on your lender's credit report. Instead, it is on your consumer Disclosure Report. There are many reasons why a lender might conduct a soft credit check, including pre-approval screening, account maintenance, and employee screening. Your credit report may be pulled by insurance companies to assess your eligibility.
An in-depth inquiry
A hard inquiry involves a lender checking a person’s credit reports and score to determine if they would be a good candidate to lend money. These inquiries typically occur when a person applies for a loan or a credit card. These inquiries can only be made if the consumer consents.
Hard inquiries can reduce a person's credit score anywhere from zero to five points. The exact number depends on the amount of time since the last inquiry and the person's credit history. You should not apply for credit unless absolutely you need it.
Soft inquiry
A soft inquiry is a high-level look at a consumer's credit report. It can be performed for a variety of purposes, from verifying identity to determining a prospective customer's demographic. A consumer can check their own credit reports for free annually from the three major bureaus. In order to apply for a new loan, credit card or other financial product, creditors and your current lenders may check your credit report. Insurance companies can also review your credit report to determine if they offer coverage.
Although a hard inquiry may negatively impact your credit score and credit rating, a soft inquiry won't. Soft inquiries are conducted by lenders when you apply to credit. These inquiries only affect your Experian credit report and will not impact your Equifax, TransUnion, or any other credit report.
Impact on credit score
A soft credit check has negligible impact on your credit score. The purpose of a soft inquiry is the same as a hard one - to check your credit report for errors or fraud. A soft inquiry is not the same as a hard credit check. It differs in what information it includes. Hard credit inquiries are used to determine whether you'll qualify for loans or credit cards and can be very negative for your credit score. A low score can lead to higher interest rate for loans and credit card.
Employers, insurance companies, and providers of medical services often initiate soft inquiries. Soft inquiries do not affect your score, but they may appear on your credit report. Griffin indicated that some consumers might see dozens of soft inquiries in their credit reports.
Dispute a hard enquiry
If you have concerns that your credit reports might be incorrect, you should immediately contest the hard inquiry. This will improve credit scores. It is important that you keep accurate documentation of all correspondence. You can speak with a specialist at a credit bureau to do this over the telephone. The entire process should take around 30 days. After your dispute is settled, the bureau should delete the inaccurate hard inquiry. You may also contact the financial institution that performed the credit check.
The difference between a Soft inquiry and a Hard inquiry is that a Soft inquiry doesn't affect your credit score. Soft inquiries, however, can be made without your authorization. When you apply for credit cards, for example, a creditor company might request a soft inquiry.
Impact of a Soft Inquiry
Soft credit inquiries are simple, high-level checks of your credit report. It can help lenders verify your identity or determine your demographic for marketing purposes. Free annual credit reports can be checked by the three major bureaus. Your current lender or creditor may review your credit reports if there are any outstanding credit card bills.
There are several types of soft inquiries. One type of soft inquiry is a preapproval inquiry for a personal mortgage. A pre-approval inquiry for a personal loan may have been completed. Lenders may also check your credit score when you apply. You won't see any negative effects from either of these types of inquiries.