When it comes to your credit score, you may have heard the terms “hard credit check” or “soft credit check”—but what do they mean?
Soft Credit Check
When potential creditors request your credit report, they may use a soft check or inquiry. This type provides a basic check of your credit score, and doesn’t go into very much depth on your credit history. A soft credit check doesn’t have a negative impact on your credit score, while a hard credit check does impact it. Creditors don’t need your explicit permission to request this information, as it just shows what you would see on your own credit report.
For an example of a soft inquiry, say you received an application for student loan refinancing in the mail from a company like U-fi. Before you received those offers, the lender likely pre-screened your credit with a soft check. These companies only offer credit to consumers who meet certain qualifications. That means they’re looking for applicants with a credit score meeting their minimum credit standards, and you exceeded those standards.
Soft checks of your credit score are typically done by employers, insurance companies, landlords, and utility companies. They do soft checks on your credit report to understand how responsible you are with your finances. These organizations use your credit score and history to determine the likelihood that you’ll pay on time. This type of information can sometimes factor into whether you’ll have to pay a deposit for utility services.
U-fi uses soft credit checks to see if you meet the minimum criteria for refinancing and find out what rates you qualify for. Getting your rate with U-fi won’t impact your credit score and it won’t cost you a cent.
Hard Credit Check
A hard credit check or inquiry is different than a soft check. It does require your permission, and is usually triggered by your active request (i.e., application) for a loan or extension of credit. When you apply for a student loan or another type of loan, the creditor checks your credit report to evaluate your eligibility. With a hard credit inquiry, the lender looks at your credit score in much more depth, as well as all relevant details of your credit history to determine your creditworthiness before granting or denying you that loan.
Hard credit checks are often done by mortgage lenders, auto lenders, and credit card companies. These types of credit checks do have an impact on your credit score because they show you are actively seeking new credit. While a hard check usually has a limited impact on your credit score, its impact depends on your individual circumstances. You may still want to minimize the number of hard inquiries on your credit report just to be safe, since a high number of hard checks in a short time shows potential lenders that you might need a lot of money. This can be seen as a bad indicator if you are looking for a student loan.
The largest factors determining your credit score are payment history and amounts owed. Be sure to check up on your credit score regularly and look for ways to improve where you can, so that when those credit checks happen, you’re seen as a good candidate for a student loan, or whatever you may be applying for. If you’d like to read more about your credit score, U-fi can help you learn about why good credit is crucial.
If you’re considering refinancing your student loans, U-fi can identify the best rate you qualify for using a soft credit check and we’ll only trigger a hard check when you’re ready to accept the loan.
Credit Score Tip: When you’re looking for a loan pre-qualification or a rate quote, make sure to read the fine print to find out what type of initial check the lender will make on your credit report. Just remember that once you formally apply for the loan, the creditor needs to make a hard credit inquiry and review your credit score and history in much greater detail.
If you need to borrow private loans to help pay for college, be smart about it. That’s what U-fi is here for, and we’ll only use a soft inquiry to check the rates you qualify for. Get started with U-fi today.