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You might be interested in Funding a Startup which requires that a possible creditor run a check on your credit, which is also known as "Pulling your credit." However, it is possible to perform two types of credit checks: either a "hard inquiry" or a "soft inquiry." There are restrictions placed on why and when reports may be pulled according to the Fair Credit Reporting Act.
The most important feature of a soft pull or a soft inquiry is that it doesn’t have any negative effect on your credit score, but a hard inquiry will.
Soft pull or soft inquiry
The soft pull or soft inquiry often takes place without you knowing anything about them. If you have ever received any credit card offer in your mail, then it is possible that the credit card company has run a check to see if you qualify for the card. After all, no company does want to spend on shipping for someone who is not eligible. Such is also the case for other types of credit/loan offers or when a mortgage broker grants a pre-approval.
Employers can also perform background checks for you. Many employers often feel comfortable hiring someone who has good credit because they think it indicates that a person is a responsible person.
More importantly, checking your loan yourself is also a soft inquiry, so you should not be afraid to run a check on your credit rating to see if it would harm or hurt your score. You may receive a free credit report either on demand at a personal finance site such as NerdWallet or once every year from any of the three major credit reporting agencies.
Hard pull or hard inquiry
Hard inquiries affect your credit score. You probably know before they happen, you should know them because your approval is required. A hard inquiry is activated when a loan is requested, for example, a mortgage, a car loan, a credit card, and student, personal or Startup Business loan.
This inquiry will be a part of your credit report, which means that whoever makes a soft or hard pull will see your inquiry. Making a hard inquiry may set you back by 5points of your FICO score. However, when you are rate shopping, (for example, for mortgages, student, and car loans), all your inquiries within 45 days are all considered as one inquiry. FICO’s competitor; VantageScore also have shopping windows, which count as one inquiry, but they are shorter. One spokesman said that a hard inquiry could reduce a VantageScore by 10 to 20 points.
You should be careful that you do not hit the credit report with many hard inquiries. Evaluate whether the bonuses you expect when you receive this credit card are worth your rating. If you have a credit pending, some points may not be so important. However, if you have your reasons, think twice about it.
Hard or soft?
Some of the inquiries may be hard or soft. If you are renting a car, renting an apartment or signing up for Internet service, opening an account at a financial institution, or someone simply checking your identity, you are hit by a hard or soft inquiry. The way to find out is to ask the potential creditor and maybe even ask at one of the credit bureaus.
This article was written for GrandTetonProfessionals.com for InquiryBusters.com. For Media Relations, please contact Misty.Burrell@GrandTetonProfessionals.com for Sales and Support Please Contact Us at: 203-599-4157 or email us at Support@InquiryBusters.com.