A “soft” credit inquiry (or a soft “pull”) is distinguishable from a “hard” credit inquiry in two key ways: it can be done without the consumer’s knowledge or consent, and it doesn’t affect a consumer’s credit score. When we hear someone caution against the harm of checking one’s credit score, they are, perhaps unknowingly, talking only about hard credit inquiries.
While credit scores are, in fact, impacted by hard credit checks, they are actually the less common of the two types. A hard inquiry typically only occurs when a consumer applies for credit or a loan, and the associated inquiry requires the consumer’s knowledge and consent. A soft inquiry, on the other hand, may be performed for any number of other reasons and, in many cases, can occur without the consumer ever knowing.
A common type of soft inquiry occurs when a credit card company sends a consumer a pre-approval letter. Since a hard credit pull will have to be performed if and when the targeted consumer submits a credit application in response to the pre-approval notice, the creditor first performs a soft pull so it doesn’t waste time and postage soliciting business from an unlendable consumer.
Soft credit inquiries are also commonly performed as part of a prospective employee’s background check. Since an employer’s credit inquiry is done for reasons other than assessing the risk of lending to a consumer, a hard inquiry is unnecessary and the employer’s pull will not reflect on the consumer’s credit report. It is worth noting, however, that an employer’s credit pull is one of the very few types of soft inquiries requiring express consent from the consumer.
Another type of soft credit inquiry occurs when a consumer checks their own credit. Under the Fair Credit Reporting Act, a consumer is entitled to receive an annual copy of their credit report at no cost and at no harm to their credit score. This annual report is identical to the report provided when a hard credit inquiry is made and gives the consumer the best available idea of what a prospective creditor or lender sees when reviewing a credit or loan application.
A more common type of soft inquiry occurs when a consumer checks their own credit report through a third-party service, such as Credit Karma. While the reported information is (or should be) accurate, the credit score provided to the consumer is likely to be at least a little different than the score provided in response to a hard credit inquiry. The disparity is due to the fact that the third-party service calculates and provides scores based on their own algorithm as opposed to using that of one of the two major score providers, FICO and VantageScore. While the third-party scoring algorithm is largely similar to that of FICO and/or VantageScore and will provide a comparable result for most intents and purposes, third-party algorithms tend to underestimate a consumer’s credit score and should not be relied on as a matter of fact.