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Hard pull vs. soft pull: Why are they so important?

Hard pull vs. soft pull

Whether you are in the market to make a large purchase like transferring a balance, purchasing a new car, or mortgaging a home, you have probably heard about credit inquiries. Inquiries occur when outside parties access your credit report. There are two types of credit inquiries: soft credit inquiries and hard credit inquiries. Soft inquiries, also known as pulls, don’t affect your credit, but hard credit pulls are reported to the three credit bureaus (Experian, Equifax, and TransUnion) and can affect your credit score.

Your credit score is used by lenders to evaluate risk. Lenders use your score to learn about your past borrowing, payment behavior, and your likelihood to repay a loan. Because of this, your credit score plays a huge impact in determining interest rates and credit limits. If you are planning on obtaining a loan in the near future, it is best to know how hard and soft inquiries affect your overall credit score.

Hard inquiries occur when you apply for a loan or credit card offer and the lender will conduct a credit check. This helps lenders decide on whether they should lend you money, how much, and at what interest rate. A hard inquiry can lower your credit score by as much as five points and can stay on your credit report for up to two years.

Some common hard inquiries are below:

  • Mortgage applications
  • Auto loan applications
  • Credit card applications
  • Student loan applications
  • Personal loan applications
  • Apartment rental applications

Soft inquiries are those that do not affect your credit score. They occur when a person or company checks your credit as part of a background check or credit card issuers check to see if you qualify for certain credit card offers. A new employer may run a soft inquiry before hiring an employee. These types of checks basically lay out how much you owe on your current accounts.

Some common soft inquiries are below:

  • Checking your credit score (directly on the credit bureaus sites)
  • Prequalified credit card offers
  • Prequalified insurance quotes
  • Employment verification (i.e., background check)

Unlike hard inquiries, soft inquiries won’t affect your credit scores. They may or may not be recorded in your credit reports, depending on the credit bureau. Since soft inquiries aren’t connected to a specific application for new credit, they’re only visible to you when you view your credit reports.

When you are looking to open a new line of credit, look for products that provide an offer with a soft inquiry. For example, the Dover Federal Mastercard® will let you check your rate without making an impact on your credit. You will be able to review the options offered. The next step will be choosing an offer and submitting the application. With the final step of accepting and submitting the offer, a hard inquiry will be placed on your credit.

The Advantage and Cash Back Credit Card offers an introductory rate as low as 0% on balance transfers and interest rates up to 250% lower than the market average. Check your rate with absolutely no impact to your credit.

Credit tip: Before applying for credit, make sure you have taken the time to build your credit score. Use resources like Dover Federal’s Credit Score Analysis. This is a complimentary program to help members review and understand what is influencing their credit score. Your credit score plays a huge role in your financial health. A strong credit score improves your chances of being approved for the best possible terms and rates for the financial products you want.

Bottom line: hard inquiries play a minor role in the totality of your credit score. They should not stop you from applying for credit when you need to open a new account. Soft inquiries are even less worrisome because dozens and even hundreds of soft inquiries cannot impact your credit score.

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