Soft vs hard credit checks: what checking your rate does

Every time someone looks at your credit report, the credit bureau records it as an inquiry. There are two kinds, and they’re treated very differently. Knowing which is which lets you shop for a loan without doing more damage to your credit score than you need to.

What a soft inquiry is

The Consumer Financial Protection Bureau describes a soft inquiry as one that happens when you check your own credit, or when a company checks it for reasons such as sending you a prescreened offer or reviewing an account you already have. Soft inquiries don’t affect your credit scores. They appear on the copy of your report that you see, but lenders don’t see them.

Many lenders also use a soft inquiry for prequalification: you share some details, they look at a limited version of your report, and they show you an estimated rate and amount.

What a hard inquiry is

A hard inquiry happens when you apply for credit and authorize a lender to pull your full report to make a decision. Hard inquiries can affect your credit scores, usually by a small amount for a limited time. Other lenders can see them, and a cluster of new applications can make you look like a riskier borrower.

Hard inquiries generally stay on your credit reports for up to two years, and their effect on most scores fades well before that.

Prequalification is not an application

Prequalification gives you an estimate. The rate and amount you see can change once the lender verifies your income and runs a full credit check. Some lenders use the word preapproval for the same thing, and some use it for a firmer offer that already includes a hard inquiry. If the wording isn’t clear, ask the lender directly: "Will this affect my credit score?"

Only the full application, usually after you pick an offer, tends to involve a hard inquiry. That’s the step to take once you’ve compared your options, not before.

What a FastLoan request does

FastLoan doesn’t check your credit. Sending a FastLoan request doesn’t affect your credit score; applying with a lender usually does. When you send a request, we pass your details to the lenders, loan brokers and marketing partners in our network. A lender that wants to show you an offer may run a soft inquiry. If you then apply with that lender, it will usually run a hard inquiry before approving the loan.

How to compare offers with as few hard inquiries as possible

1. Check your own reports first, so there are no surprises. You can get free reports from each of the three bureaus at AnnualCreditReport.com.
2. Prequalify with lenders that use soft inquiries, and compare the APR, the total you’d repay and any origination fee.
3. Submit a full application only to the lender whose offer you’re most likely to accept.
4. If you’re turned down, ask why before applying elsewhere. The lender has to tell you the main reasons or how to request them.

Some credit scoring models group several inquiries for the same kind of loan within a short window and count them as one. That treatment was designed for mortgage, auto and student loan shopping. Don’t assume it covers personal loans, which is why prequalifying first matters.

What a lender sees in a soft check

A soft inquiry for prequalification usually returns a summary of your credit file: your score from the bureau the lender uses, how much you owe, how much of your available card credit you’re using, and whether you’ve missed payments recently. That’s enough for an estimate. The full application adds what the soft check can’t confirm, such as your income, your employer and your bank account, which is one reason a final offer can differ from the estimate.

Credit freezes

If you’ve frozen your credit reports, which is free at all three bureaus, a lender may not be able to pull your report for a full application. You can lift the freeze temporarily, or for one bureau only if the lender tells you which one it uses. A freeze doesn’t stop soft inquiries from companies you already do business with or from prescreening.

Watch out for these claims

Be wary of any ad that promises a loan with no credit review of any kind. Most lenders verify your identity, income or credit before lending, and many check with specialty bureaus even when they don’t use the big three. A claim that sounds too easy is often attached to a very high APR.

Also check who’s asking. A soft inquiry from a company you’ve never heard of can mean your details were shared for prescreened offers. You can opt out of prescreened offers at OptOutPrescreen.com, the official site run by the credit bureaus, or by calling 1-888-567-8688.

If something on your report looks wrong

If you see a hard inquiry you didn’t authorize, contact the company that made it and the credit bureau that reports it. An unexpected inquiry can be a sign that someone applied for credit in your name. The FTC’s IdentityTheft.gov site walks through the steps.