What Is a Credit Check?

A credit check refers to an evaluation of your credit history that prospective lenders request when applying for credit. This allows promising lenders to check your credibility as a borrower by viewing how well you respond to pass loans by making payments on time, your recent debt profile. This data is also known as credit history.

A credit score indicates how well you manage your finances in the past. Checking your credit is synonymous with pulling your credit, which is also subdivided into the hard pull and soft pull. The Fair Credit Reporting Act has a number of requirements about when potential lenders can actually pull your credit. This protects the consumer credit score from being unnecessarily lowered. It also helps the lenders to  know how well they can make both hard and soft inquiries 

What Is a Hard Pull?

An understanding of hard pulls is very important when applying for credit because your credit score can be affected. Your consent is needed before any hard pull can be performed. When you apply for credit, a hard inquiry is executed by the prospective lender. This involves car loans, applications for mortgages, credit cards, student loans, business loans, and personal loans.  A hard inquiry automatically becomes part of your credit document, so promising lenders can see it was executed. The negative impact of credit score is caused by a high number of hard pulls. Therefore you should avoid hard pulls when possible.

Furthermore, a hard pull is a crucial step in applying for credit. A vital aspect to remember is that a single pull is that hard inquiries made within a period of 45 days. In order to avoid a negative influence on your credit score, you need to plan hard pulls around the same time. Also, remember that you should consider your credit scores before any hard pull. The points you lose from hard pull can be avoided provided your credit score is strong but on the contrary, think twice before requesting a hard inquiry.

What Is a Soft Pull?

Soft inquiries do not have a negative effect on your credit score in any way. Although, it is being made into your credit all the time.  Anytime you receive a credit card, it is certain that a soft inquiry has taken place on your credit. This enables potential lenders to foresee if you would be considered for a loan before they offer it. Soft pulls are often favorable for both creditors and applicants because they help lenders find borrowers who match their marked profiles.

Employers sometimes perform soft pulls while recruiting new employees, also employers see a good credit score as a signal that a potential employee is responsible. Mortgage lenders, auto lenders, and other prospective creditors often perform soft inquiries in a bid to find potential customers. Soft pulls make it possible for employers to steer clear of individuals who do not qualify.