Are you thinking about your credit score? You may have heard the terms soft and hard inquiry bandied about and wondered what it means.
A soft credit inquiry, otherwise known as a soft check or a soft credit pull happens when (you or someone you have authorised) checks your credit score. The difference between a soft and a hard inquiry is that a soft inquiry is not associated with a specific application. It is merely the checking of your score, by yourself or a lender. A hard inquiry will have a dollar amount and stays on your credit report for 2 years. For more on hard inquiries, head here.
So what does a soft credit inquiry mean? We answer some of the biggest questions.
When will a soft inquiry occur?
Unlike a hard inquiry, a soft inquiry is not made at the time of an application for credit. It can be made by a potential employer, creditor or even insurance company. Here are some of the most common situations that might warrant a soft credit check.
When you authorise a potential employer to check your credit score
Some jobs that require employees to handle money may require a credit check. If you are handling large amounts of cash your employer may want to check that you are not under financial duress. Think banking, investing or accounting positions.
When a credit card issuer or lender checks your credit to pre-approve you for an offer
If you have inquired about a pre-approval for a home loan, the bank may run a credit check on you to let you know what sort of products you are eligible for. The inquiry will not show on your record until you make the application, although you should be clear with your bank that you don't want them to make a hard inquiry until you are ready.
When you check your own credit score
You may be thinking about buying a house or car, and want to see where your credit rating is currently standing. This is classed as a soft check and will not affect your rating.
One of your current creditors check your credit
A telco, credit card issuer or other lender may conduct a soft credit check before extending more credit. This is to make sure that your circumstances haven't changed.
Will a Soft Inquiry Appear on my credit file?
Yes, but they will appear on their own section and are clearly distinguishable from hard enquiries and are only visible to you. They show the name of the company that inquired and the date the inquiry was made.
Will a Soft Inquiry affect my credit score?
Soft inquiries will not affect your credit score as they are not visible to potential lenders. So no need to worry, checking your credit score will not affect it!
How Long will a soft inquiry stay on my credit file?
Soft inquiries stay on your credit report for 12 to 24 months.
Can someone do a soft check without my permission?
Yes. In many cases, businesses are able to do a soft pull without your permission. If you've ever received a letter in the mail from your bank saying that you are pre-approved for a credit card or an increased limit, this is likely the result of a soft inquiry.
How do I check my credit file?
The best company for checking your credit file (in my humble opinion) is Credit Savvy. All you will need is your drivers' license and one other form of identification. You will need to create an account, but there are some great learning resources on the site too. It's a thumbs up from me. For more info on how to check your credit score, check out this article.
I hope you have enjoyed learning about credit scores. It's not something that many people think about, but having a healthy credit score can set you up for success in the future, even for the credit shy (like me)