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

Getting a credit check might sound bad for your credit, but a credit check is a normal part of getting credit or completing applications. With a credit check, a financial institution, company, or employer gains access to your credit report and checks on your creditworthiness.

There are 2 types of credit checks – a hard check and a soft check. We’ll explain both and give lots of examples of both. Plus, we’ll discuss how long they stay on your credit score and ways you can minimize their impact.

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 check that this is the case if you’re concerned about having 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. For instance, this lets other lenders or companies see how often you shopped around for new credit.

Your credit score takes a slight hit following a hard credit check, but it is temporary and 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?

Since soft credit checks don’t impact your score, how long they stay on your report doesn’t matter very much.

Instead, you’ll want to pay attention to how many hard credit checks you have on your report. Since hard checks stay on your report for 3 years (or up to 6 years for TransUnion), you must be selective about shopping for credit.

How to reduce the impact of a hard credit check

There are 2 credit report bureaus in Canada, TransUnion and Equifax, so your credit score may be calculated differently depending on which one your financial institution gets their 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 monitoring bureaus.

FAQ

What shows up on a soft credit check?

A soft credit check shows what accounts you have open, how often you’ve applied for credit or looked at your credit report, whether you have debt in collections, and the number of hard credit inquiries you’ve made.

Do employers do a soft or hard credit check?

Usually, employers do a soft credit pull as part of a background check. Remember, they’re not issuing you credit, which is why someone might do a hard credit pull.

Can you fail a soft credit check?

Since a soft credit check doesn’t determine if you get credit, you can’t fail it. Instead, a soft credit pull looks at your credit health and history to understand your financial habits.

How many points is a hard credit check in Canada?

A single hard credit check shouldn’t have too much of an impact - you’ll usually see your score drop by 5 points or less.