I talk a lot about “hard” and “soft” credit pulls. I don’t think I’ve ever actually seen these terms used by FICO officials, so it may be kind of confusing. Money geek slang, who knew? A credit check, also known as credit pull or credit inquiry, is (logically) when a third party wants to examine at your credit history.
A “soft” pull is one that does not affect your credit score. You can get 1,000 of these and it won’t matter as they are not visible to other people checking your credit. These are often done without your knowledge as long as they have a “permissible purpose by law”, and may include:
- A new credit card issuer or mortgage company wanting to send you a “pre-approved” loan offer.
- An existing card issuer (like Citibank) checking up on you periodically to make sure you haven’t been going nuts and opening 37 other accounts.
- An employer doing a background check before a job offer is extended.
- You checking your own credit history and/or score.
- A bank just verifying your identity when opening an account.
Conversely, a “hard” pull is one that does affect your credit. It is supposed to only happen when you give express permission to do so, usually when you are seeking some form of credit or insurance. It will lower your FICO score by about ~5 points temporarily for ~6 months (after which it will bounce back up), and will also be visible to future people checking your credit.
Whenever you apply for a credit card or a credit line, expect to have a hard credit inquiry. However, it has become more and more common for non-credit institutions, like banks and credit unions to perform a hard pull as well. Some will only do it if you ask for overdraft protection, which makes sense as it is basically a ~$500 line of credit combined with your checking account. Others will do it for any account opening at all. I was surprised and disappointed to see that Bank of America did a hard pull when I opened an new account with them.
Because each hard pull hurts your credit history temporarily a bit (with some exceptions), I am always very protective of my credit checks. I personally try to keep them down to about 4-5 within the last rolling six months. Probably due to this, credit card companies often feel they have to give people with above-average credit an incentive to apply for a new card. Notice how sub-prime credit cards never offer good deals?