A credit pull is also called a credit inquiry which is a request from a business entity, lender, landlord or a credit company and they check what your credit is. This can negatively affect your credit score depending which type it is. There are two types of credit pulls, a hard credit pull and a soft credit pull.
What is a hard credit pull?
A lender will check your credit report and your credit score if you apply for a mortgage, auto loan, or credit card to see if you are creditworthy. When this occurs, it will show up on your credit report as a “credit inquiry” and it can lower your credit score. Hard pulls are only allowed if you give someone the permission to do so.
The following are examples of a hard credit pull:
- You are looking for a car at a dealership and they pull a credit report when applying for financing
- You receive a pre-approved credit card offer in the mail and respond to the offer
- You request a credit line increase from your credit card company
- Apartment rental applications will do a hard credit pull to see if you can afford living there
How a hard credit pull affects your credit score
Hard credit pulls can reduce your credit score anywhere from five to ten points. It is important to be mindful of the credit you are applying for and how many times you apply and how often it is done. If someone sees you have multiple inquires it shows you are rate shopping to find the best loan deal possible. A single inquiry will not affect your credit score much. It takes about 90 days for your credit score to recover, after 12 months it will no longer affect it, and after 2 years the hard inquires will not be on your credit report at all.
How to remove hard credit pulls from your credit report
If a lender performed a hard credit pull on a loan you applied for, it is unlikely that it can be removed. However, sometimes credit reports have mistakes on them and there might be some on there that you did not authorize, and these could be removed. If you find this on your credit report, you must dispute the inquiry as soon as possible. You will then need to contact the credit bureau and ask them to remove the mistake on your credit report.
How to manage hard inquiries
If you are worried about hard inquiries, there are some steps you can take to manage them.
- Make sure to apply for credit only when you need it
- Check your credit report regularly to ensure that there are not any hard inquiries that you did not personally authorize
- Manage your payment history and credit utilization rate (how much credit you have available), pay all bills in a timely manner and pay off any credit card debt that you may have.
What is a soft credit pull?
Soft credit pulls occur without you knowing they happen. For example, when you get any credit card offer in the mail, the company probably did a soft credit pull to see if you qualify for their credit card. Any other businesses, lenders, and insurance companies can do a soft credit pull to see if you qualify for a pre-approval offer.
Other examples of a soft credit pull:
- Employers may also do a soft credit pull on you too to determine if you are a responsible person
- Your bank gets an updated FICO Score on all its customers to check the credit quality of their customers
- Pre-qualified insurance quotes
Before you begin to apply for credit, make sure that your credit score is strong as it can improve your chances of being approved as well as having the best possible rates and terms. To have a strong credit score do not overspend and consider whether you should close your credit card accounts or not. If you need a loan, make sure to do your rate shopping within 30 days. Be mindful of this information so you can be successful in accessing credit.