CREDIT 101: HARD PULLS vs. SOFT PULLS

Financial | Credit 101 | 5 min

Summary:

Today we’re going to talk about credit pulls. Lenders will pull your credit score to determine your eligibility. But what’s the difference between a hard pull and a soft pull? What effect do they have on your score? Let’s get started.

Credit scores are an important benchmark of your financial health. It’s also one of the first things your lender will determine when you start the VA Home Loan process. At VeteransLoans.com, we’ll soft pull your credit score when we work to get you pre-qualified, and then we’ll hard pull your credit score to get you pre-approved. Not all lenders are the same, though. What is the difference between a hard pull and a soft pull, what do they mean, and will they affect your credit score? Let’s break it down.

Hard Inquiries:

Generally speaking, a hard inquiry happens when a financial institution checks your credit for a new loan or line of credit. You’ll also generally have to authorize these hard inquiries. 

Depending on your overall credit health, the effect of a single hard inquiry could range from zero to a couple points. FICO, for example, says, “For most people, one additional credit inquiry will take less than five points off their FICO Scores.” Your score will typically recover from this inquiry after a couple months.

There’s strength in numbers, however, and subjecting your credit to multiple hard inquiries in a short amount of time can have a more damaging effect. Because hard inquiries show the application for a new line of credit, having many hard inquiries can show financial distress. Having several inquiries can also indicate the addition of new debt or credit, and your credit score will need time to reflect whether or not you’ve handled the new debt or credit responsibly. 

Soft Inquiries:

Soft inquiries happen any time your credit is pulled for a reason not associated with taking on a new loan or line of credit. For example:

  • Cell phone companies might soft pull your credit to help determine your rates
  • Utility companies might soft pull your credit to decide for/against down payments
  • Self-reporting agencies will soft pull your credit when you check your credit score yourself

Because these situations show no sign of increased financial burden, they have no effect on your credit score. When your credit is about to be pulled, it is wise to check with that institution to confirm which type of inquiry they plan on using.

How We Handle Credit Inquiries:

Here at VeteransLoans.com, we’ll use a soft inquiry when determining your eligibility. After all, there’s no point in making a hard inquiry on someone who might not be eligible for the VA Home Loan in the first place. Plus, we want to be able to determine your eligibility risk-free.

Before you pre-qualify, we’ll soft pull your credit scores from each of the three major bureaus. We’ll then use your middle score to determine your eligibility. If your scores look like:

  • Experian: 580
  • TransUnion: 645
  • Equifax: 610

We will use your 610 score when determining your eligibility; at this time a 610 is ineligible. While our minimum required score varies from time to time, generally the range of 620-640 is where you’ll need to be to start. Because we don’t use a score that you will pull from Credit Karma or a similar site, the only way to know for sure if you qualify is to give us a call at 1-888-232-1428 or visit us at https://www.veteransloans.com/prequalify