Soft Credit Check vs. Hard Credit Check: How It Impacts Your Credit Score

Whether you're shopping for new credit or are just curious about your credit score, it helps to understand a soft credit check vs. a hard credit check.

Think of a soft check as a quick glimpse into your financial habits, and a hard check as a more thorough exam.

We'll go into more detail about when lenders or organizations use a hard credit check, how to see your score for free, and ways to minimize the impact credit checks have on your overall credit report.

What is a soft credit check?

A soft credit check doesn't impact your credit score because it's done for non-lending reasons, like background checks. Sometimes, you don't even have to be the one requesting the credit check – lenders or potential employers might do a soft check if they're considering you for pre-approval or hiring.

Usually, lenders you already work with do soft credit checks because they did a hard credit check when you initially started working with the lender. However, you might want to confirm this if you're concerned about too many hard credit checks.

In short, you don't need to apply for credit for a soft credit check to take place.

A soft credit check is sometimes called a soft pull.

What is a hard credit check?

If you're trying to get credit, your potential lender will do a hard credit check to pull your credit report. This gives them more information about your credit score and who has viewed your credit file.

When a company or lender does a hard credit pull, it appears on your credit report. This way, other lenders or companies can see how often you shopped around for new credit.

Your credit score takes a slight hit following a hard credit check, but it's temporary, and your score should bounce back.

When are soft vs. hard credit inquiries used?

It's easy to get these credit checks mixed up, so examples help! Here are some scenarios when you might get a credit check:

Soft credit check:

• An employer does a background check as part of the hiring process
• Your credit card issuer might pre-approve you for financial offers
• Your insurance provider is renewing your policy
• A landlord screens you as part of your rental application
• You request your credit score
• You sign up for a buy now pay later service

Hard credit check:

• You're applying for a credit card, mortgage, or car loan
• You apply for a personal or student loan
• A potential landlord does a more thorough background check

To do a hard credit check, you have to give your permission to the person or company who wants the information.

How long do credit checks stay on your credit report?

The length of time a check stays on your report depends on whether it's a hard credit check vs. a soft credit check. Soft credit checks don't impact your score. So, how long they stay on your report doesn't matter very much.

On the other hand, since hard credit checks stay on your report for 3 years (or up to 6 years for TransUnion), you must be selective about shopping for credit. You'll want to avoid submitting multiple applications to avoid getting multiple hard inquiries – and use tools like Amex Apply with Confidence to check your approval odds before applying.

How to reduce the impact of a hard credit check

There are 2 credit bureaus in Canada: TransUnion and Equifax. Your credit score may be calculated differently depending on which one your financial institution gets its report from.

Either way, you can reduce the impact a hard credit check has on your score by:

• Limiting the number of credit checks: If you're shopping for a mortgage or loan, try to apply and find a lender within 2 weeks. Multiple inquiries within this timeframe are treated as single inquiries, so your score won't get dinged repeatedly.
• Space out your applications: Credit cards aren't treated like mortgages or loans, so if you're looking for a new credit card and want to apply for several, wait a bit between applications. Applying for multiple cards at once can be a red flag on your credit score.
• Only apply for credit when you need it: It might seem nice to have access to lots of credit – but unless you truly need a new credit card or loan, don't apply for credit frequently.
• Review your credit report: It's a good idea to check your report occasionally, even when you're not shopping for credit. If you spot any inaccuracies, this gives you time to dispute them with the credit bureaus.

Where can I check my credit score for free?

It's getting easier and easier to find ways to check your financial health for free. In addition to the major credit bureaus in Canada, you might be able to check through your big bank or use the services of a third party.

Just be aware that some third-party companies charge for additional services, like credit monitoring.

FAQ

Can you fail a soft credit check?

There's really no way to fail a soft credit check because these don't determine whether or not you get access to credit. A soft check simply looks at a snapshot of your credit health and history to give someone an idea of your financial habits.

Is there a downside to soft credit checks?

Soft credit checks don't damage your score the same way hard checks temporarily do. Instead, the downside might be if you lose out on a job or apartment because a potential employer or landlord is concerned about your financial habits.

What's the biggest killer of credit scores?

Your payment history is the biggest factor in determining your credit score, so missing payments or making them late will definitely damage it. That's why it's crucial to at least make all your minimum payments on time. You can rebuild your score by making future payments on time.

Where can I check my credit score in Canada for free?

You can log in to your TransUnion and Equifax accounts to see your credit scores for free. Both bureaus update scores monthly, so it's a good idea to check your scores with both bureaus regularly. This way, you can catch and correct errors quickly.

Can I dispute a hard credit inquiry?

Yes, credit bureaus must fix errors for free. including hard credit inquiries you didn't authorize. To make a dispute, contact the credit bureaus and fill out their respective request forms. Then, contact the lender that supposedly made the hard inquiry and dispute the issue directly with them.