/ Finance 101

What’s the difference between a soft and hard credit pull?

When you apply for a loan, credit card or even a rental accommodation, companies will “pull” your credit report so they can understand your past borrowing behaviour (also called a “credit check” or “credit inquiry”). But, did you know there is more than one type of credit check?

Soft. vs. hard credit check. What’s the difference?

A soft credit check won’t impact your credit score or show up on your credit report. On the other hand, a hard credit check might cause you to see a slight drop in your credit score, and it will show up on your credit report (meaning it will be visible to other lenders). Another difference? A lender requires your consent before doing a hard credit check, but this isn’t the case for a soft credit check.

When companies use a soft credit check vs. a hard credit check:

  • What is a soft credit check?

Most soft credit checks are done to “pre-qualify” you for some type of offer. If you’ve ever received a credit card promotion in the mail, the credit card company likely did a soft credit check on you which would signal to them how likely you are to meet their credit criteria. Other types of soft credit checks are credit monitoring services or loan and insurance quotes.

  • What is a hard credit check?

Companies do a hard credit check when they are making a “lending decision”, or giving you access to credit. If you’re “pre-qualified” for a credit card offer, you’ll likely have to give the credit card company permission to perform a hard credit check before they can finalize the application and give you the credit card.

Examples of soft vs. hard credit checks:

Soft credit check

Hard credit check

  • Most credit monitoring services (Equifax or TransUnion)
  • Loan or insurance “quotes”
  • Receiving a “pre-qualified” credit card promotion in the mail
  • Taking out a personal loan
  • Opening a new bank account
  • Applying for rental accommodation


Protect your credit score by minimizing hard credit checks

It’s typical to see your credit score drop a few points after one or two hard credit checks. Other than that, a hard credit check shouldn’t have too much of a significant of an impact on your credit. However, too many credit checks in a short timeframe can have a negative affect your credit score.

Since hard credit checks are visible to other lenders, it may be harder for you to access credit since this activity on your credit report could be perceived as “credit-seeking” behaviour.

Here’s why:

Lenders look at a variety of criteria when deciding whether to lend to you. The most important criteria for our scenario is debt to income ratio.

Debt to income ratio (DTI): Debt to income ratio represents how much your debt payments cost each month in relation to how much income you earn. It’s typically harder to access credit if your debt to income ratio exceeds 36%.

While you may just be shopping around for the best rate, lenders might assume that you intend to follow through with every inquiry. If you took on all the other debt and loans you applied for, your debt to income ratio would increase, and a lender may perceive you as a riskier borrower.

Does applying for a loan affect my credit score?

Interested in shopping around for the best rate? At Fairstone, our online loan quote uses a soft credit check to help you estimate how much money you could qualify for (and find out what your payments could be). Since we use a soft credit check, the loan quote won’t show up on your credit report as an inquiry, and it won’t be visible to other lenders. We’ll only do a hard credit check if you’re happy with your loan quote and want to proceed with the loan application.

The best part about our loan quote? It’s simple, secure and only takes a few minutes. Try it today to see if a Fairstone loan is right for you.