What is a Hard Credit Pull And Why Does It Hurt Your Credit Score

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The time has come: you’re opening a new business credit card account, or perhaps applying for a small business loan. And you know exactly what’s coming: someone’s going to have to perform a credit check.

Even if you have stellar credit, you panic a bit. You ask yourself, Is this going to lower my credit score?

Chances are, maybe. It depends on whether the credit check is a hard credit pull or a soft credit pull. The type of pull depends on the type of financing you’re applying for. While soft credit pulls, or credit inquires, don’t affect your credit score, hard pulls do.

Read on for an explanation of hard credit pulls, when you can expect a lender to perform one, and what it does to your credit.

What is a hard credit pull?

A hard credit pull is simply a full credit check that occurs when a bank or other lender is deciding whether or not you would be a desirable (i.e. creditworthy) customer. They’re able to get more information on your past credit behavior than they would with a soft pull.

Hard pulls require your consent before they occur. This means companies can’t randomly decide to do a hard pull on your credit and approve you for a credit card or loan without your permission.

Soft pulls, on the other hand, often occur as part of a background check that someone may perform on you. They also don’t require your permission. So, the next time you receive a pre-approved credit card offer in the mail, understand that that credit card issuer has already performed a soft inquiry on your credit. However, there are also times when you initiate a soft pull yourself.

When should you expect a hard pull vs. a soft pull?

If you’ve ever had a background check performed on you before being offered a job, that would have involved a soft credit pull. Additionally, pre-approved credit card offers or insurance quotes you receive would involve a soft pull. Finally, soft credit inquiries occur when you check your credit yourself on a site like Credit Karma.

Hard pulls are a common part of any loan or credit application. They typically occur when you apply for one of the following:

  • Personal loan
  • Business loan
  • Student loan
  • Line of credit
  • Credit card
  • Mortgage
  • Auto loan
  • Apartment rental

How do you remember which is going to happen? Simple: if you took the initiative to apply for a loan or credit yourself (and it doesn’t specify “no credit check required”), it’ll probably involve a hard credit pull.

Of course, there are other instances in life that will require a credit check in the form of either a hard or soft pull. Things like utilities, internet, and cable providers will often do a credit check, and it could be in the form of either a hard or soft pull.

How will it affect my credit?

Put simply, yes: a hard credit pull will affect your credit. However, not by much—you can expect them to lower your score 5 points for about 6 months but that doesn’t always happen.

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