A soft credit pull is a type of credit inquiry that does not affect a person’s credit score and often does not even appear on a typical credit report.
When a business or financial institution checks or “pulls” a person’s credit, an inquiry is usually placed on the individual’s credit record to indicate that a person or company requested a copy of the borrower’s credit report. This inquiry may negatively affect the individual’s credit score, as it may indicate that the borrower is about to obtain additional debts.
The exception is if the credit inquiry is a soft pull – which does not affect the borrower’s FICO credit scores.
In the consumer credit reporting arena, there are two types of credit inquiries: hard and soft. The standard version recognized by most consumers who have applied for a loan or seen a copy of their credit report is the hard pull or hard credit inquiry. The hard credit pull typically requires the following:
The above rules do not necessarily apply with soft credit inquiries:
Because no authorization is required, many consumers are subjected to soft credit pulls every year – without ever knowing if and when it occurs.
One of the common examples of the soft credit pull at work are the “preapproved” credit card and personal loan offers people may receive in the mail. The lenders and creditors who make those preapproved offers are required to stand by their preapprovals – subject to the conditions stated on the offer.
So how do these finance companies, banks and credit unions preapprove a person who has never applied with them?
The answer is through a soft credit pull. Here’s how one way in which a credit card company may process a soft-pulled preapproval offer:
The creditor in this scenario has just conducted a soft pull on those preapproved borrowers. The creditor must then make an offer to the individuals who passed their soft-pull credit request.
For the others on the preliminary mailing list that did not pass the creditor’s preapproval criteria, the creditor will not have to make an offer or send them a denial letter. Those non-preapproved prospects won’t even know that a soft pull was conducted on their credit.
Note that in both of the above cases, the creditor receives no credit data about the individuals on the list, except for whether or not they meet the creditor’s preapproval requirements.
Unlike a hard pull credit inquiry, a soft pull will not negatively affect a person’s credit report. As mentioned above, the reason that a hard inquiry will affect a credit score is because it is often an indication that the borrower is about to get new credit or loans – and possibly add more debt.
If the borrower records several hard credit inquiries in a short amount of time, it may be because the borrower is shopping around for the best deal. Or it may mean that the borrower is about to add on a lot of new debt accounts.
A soft pull often happens without the borrower’s consent, as in the “preapproved offer” example above. Also, only a small percentage of these preapproved offers ever result in an actual loan or credit card.
So, credit scoring systems like FICO do not take soft credit inquiries into consideration when calculating credit scores.
Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.