What Are Soft Credit Checks?

When you’re looking to finance something (a car, home, furniture, etc.) the odds are pretty high that the lender will do a credit check. But what does that mean and does that affect your score? Here’s what you need to know about your credit report and the differences between hard and soft credit checks.

What Are Soft Credit Checks?

Your credit report is one of the most important aspects of buying a home. It will tell the lender how much debt you carry and whether you’ve ever foreclosed on a home. It also includes some information such as name, address, and social security number. Your credit score is determined by taking into account all the information provided by your credit report. The higher your credit score, the lower the interest rates available to you.

Do Credit Checks Affect Your Credit Score?

Yes, hard credit checks could potentially lower you credit score a few points. Losing those few points may not seem like a big deal, but when you’re aiming to buy a home with the highest score, every point counts. No one wants to see that their score could have been improved by something as small as a credit inquiry.

Soft Credit Checks

Fortunately there’s a way for lenders to see your score without it hitting your credit score. This process involves a lender to get a general assessment of how credit worthy you will be going forward. If everything looks good, you can move to get pre-qualified with a lender and indicates that your score is favorable and you have a pretty good chance of getting approved for a loan.

By using a soft credit check, lenders can likely tell if a borrower is approved for credit before they do a hard pull. This helps eliminate an unnecessary hard inquiry. Another perk of soft credit checks is that you can pull a general score at anytime using free online credit monitoring apps. Many of these services also alert you if something suspicious happens on your credit report so you can take action immediately. Additionally, these apps break down areas of strength and areas of opportunity with your score. It will let you know if credit utilization could use some improvement, and if you have already hit your max hard inquiry count for this year. Frequently checking your score with one of the apps can help you improve your score to help prepare you to buy a home.

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