Understanding Soft Credit Check & Its Impact On Your Credit Score
Your credit history does influence a significant part of your financial life choices. A soft credit check is mostly done for promotional or informational purposes at is one of the methods you can employ to ensure that you stay on top of your credit score. Three top-end credit bureaus – the Equifax, Experian, and TransUnion – handle credit reports for consumers and provide one free report annually.
Every time you or any other party checks your credit, it will be reflected in your credit reports. Given this fact, have you ever received an offer for a credit card via email or postage and wondered who the credit card companies knew you would need one or qualify for a credit card? They probably did a soft credit card check to determine if you are eligible for such an offer.
Why Soft Credit Check?
As stipulated by the Fair Credit Reporting Act, all consumer credit reporting bureaus are required to keep a record of all the parties (businesses or organizations) that review your credit score.
In most cases, the soft credit check is done without your knowledge, and you do not get to initiate these inquiries, such as when applying for new credit. But there is an exception to it, which is only when you check your credit score yourself.
The soft credit inquiry may be:
- A review of your credit history and score by a lender from whom you requested your current line of credit
- Pre-approved credit offers
- Review of your credit for certain purposes such as security insurance
- Review requests from your landlord
The soft credit checks will be reflected on your credit history reports for two years so that they highly all the parties (individuals, businesses, or organizations) that reviewed your credit. Fortunately, the soft inquiries do not dent your credit score or history.
A Soft Check Vs. A Hard Check, What Is The Difference?
A hard credit check is initiated when you request for a line of credit such as an auto loan, credit card, personal loan, or a mortgage. After submitting your application to the lenders, they will make inquiries into your credit history and score to find out if you qualify to get the line of credit.
In comparison to the soft credit check, hard inquiries can hurt your credit history and score. One of the top reasons is the fact that the hard check will highlight high credit risks that the lender will take into consideration when approving your loan request. The more the hard inquiries, the less favorable things are for you since they make it appear as though you are having a tough time managing your finances.
On the other hand, soft credit inquiries are never included in the risk calculation since the checks are conducted without you knowing are for promotional or informational purposes. As such, your credit score is never dented irrespective of the many soft inquiries that are done and appear on your credit history report.
What Are The Benefits Of A Soft Credit Check?
The soft credit inquiries have few drawbacks that are quickly overshadowed by the benefits that include:
- The queries offer for new and better lines or credit as well as credit cards
- You can manage to maintain or increase your credit score thanks to the regular inquiries.
- The checks can help you get pre-approved for better mortgages
- They can help landlords distinguish you from other tenants when you are interested in leasing an apartment with controlled rent.
Overall, the soft credit checks will let you know the number of inquiries made and by whom, and when. All this information can be reflected in a section of your credit history report. Moreover, you also can review your credit details when you see the need, and you do not have to worry about being penalized.