Understanding Credit Checks
When you apply for credit, lenders typically perform a credit check to assess your creditworthiness. There are two types of credit checks: soft and hard. Understanding the difference between them can help you make informed decisions about your credit.
- A soft credit check, also known as a soft inquiry, does not affect your credit score.
- A hard credit check, also known as a hard inquiry, can temporarily lower your credit score.
Soft Credit Check
A soft credit check is typically used for pre-approval offers or to verify your identity. It does not require your permission and can be performed by lenders, creditors, or other third parties.
Hard Credit Check
A hard credit check is performed when you apply for credit, such as a loan or credit card. It requires your permission and can result in a temporary decrease in your credit score.
- Multiple hard inquiries within a short period can have a more significant impact on your credit score.
Conclusion
In conclusion, understanding the difference between soft and hard credit checks can help you manage your credit effectively. While soft credit checks do not affect your credit score, hard credit checks can have a temporary impact.