When it comes to your credit, 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 of inquiry provides a basic check of your credit score. A soft credit check will generally not have a negative impact on your credit score.
For an example of a soft inquiry, say you received a pre-qualified offer for student loan refinancing in the mail from a company like Nelnet Bank. Before you received those offers, the lender likely pre-screened your credit with a soft check. Nelnet Bank uses soft credit checks to see if you meet the minimum criteria for refinancing and find out what rates you qualify for.
Soft checks are also 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.
Hard Credit Check
A hard credit check or inquiry is different than a soft check as it may have an impact on your credit score.
A hard credit check 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 report in much more depth to determine your creditworthiness before granting or denying you that loan.
Hard credit checks are often done by mortgage lenders, auto lenders, student loan companies, and credit card companies. These types of credit checks may 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 and the credit scoring model used by the consumer reporting agency.
If you’re considering refinancing your student loans, Nelnet Bank 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.
Nelnet Bank does not provide legal, investment, tax, or financial advice. This page and the information contained herein is for informational purposes only. This content is not meant to address the circumstances of any particular individual. Nothing contained in this article constitutes a recommendation or endorsement by Nelnet Bank. For specific advice about your unique circumstances, consult with a qualified professional.